Bertrand et al (2023)

Bertrand, Marianne, Matilde Bombardini, Raymond Fisman, Francesco Trebbi, and Eyub Yegen. “Investing in Influence: Investors, Portfolio Firms, and Political Giving.”  NBER Working Paper, 15 May 2023. 

From the authors’ abstract - “We find that after the acquisition of a large stake, a firm’s political action committee (PAC) giving mirrors more closely that of the acquiring investment management company (in our preferred specification, a 31 percent increase in comovement). This pattern is observed for acquisitions driven by new index inclusions, which suggests that our findings result from a causal effect of acquisitions rather than other correlated shifts in political agendas…  Overall, our findings suggest that corporations’ political business strategies are likely dictated by broader considerations than simple profit, and modeling corporate influence should take into account how corporations are governed.”

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4334955

 

lk notes from presentation by Eyub Tegen at PRI in Person Academic Network Conference (Tokyo), 2023.

 Big growth in institutional ownership of stocks, from 6% in 1950 to 65% in 2017.

U.S. firms have become more politically active – PAC contributions, lobbying, commenting on bills.

We find a causal relationship between acquisition of large stakes in firms, and correlation in PAC giving between firms and the investors making the investment.

  •  Results not driven by the large index managers (BlackRock, State Street, Vanguard).

  • Results are stronger when firms are under higher pressure during annual meetings. 

  • “Asset managers may use this as a way to make firms more political.”

  •  Traditional belief was that political donations were driven by profit motivation of the firm.

  • We show investor preferences also play a role in understanding political activities of firms.

Dylan Minor (discussant) comments -

Are firms indulging political preferences?

Study does a good job of measuring political activity – Cosine similarity a great tool for this.

  • The big story is that passive investors are influencing companies to become more Republican, often by adding to the board post-acquisition.  They do this while they are publicly advocating more liberal policies for the companies.

  • Effect is 48% - 50% post acquisition.