Politician’s Equity Holdings and Corporate Social Responsibility

• In Event: Current Topics in Governmental Accounting

Abstract

This study examines the relationship between politician’s equity holdings and the corporate social responsibility (CSR) performance of companies. Politician equity holdings reflect not only the self-interested investment activity of firms, but also a potential source of benefit to the firm as politicians naturally pursue their self-interest through pro-firm legislative and regulatory activity. These investments come at the cost, however, of increased public scrutiny and political monitoring over the firm’s activities. Using politician equity holding data and CSR data for a sample of S&P 1500 firms, we find evidence that firms respond to politician equity holdings through both increased CSR strengths and concerns, suggesting that both social pressure and politician interventions are motivating firm CSR behavior. These findings are robust to the use of alternative models which account for potential endogeneity concerns.

Authors

• Jonghwan Kim, Bocconi University

• Kwangjoo Koo, Pennsylvania State University - Erie

• Michael Thomas Paz, Cornell University - SC Johnson College of Business (SHA)