Game Not Stopping
Hedging on the Hill: Does Political Hedging Reduce Firm Risk?
Dane Christensen et al.
Management Science, forthcoming
Abstract:
We examine whether firms’ political hedging activities are effective at mitigating political risk. Focusing on the risk induced by partisan politics, we measure political hedging as the degree to which firms’ political connections are balanced across Republican and Democratic candidates. We find that greater political hedging is associated with reduced stock return volatility, particularly during periods of higher policy uncertainty. Similarly, greater political hedging is associated with reduced crash risk, investment volatility, and earnings volatility. Moreover, the reduction in earnings volatility appears to relate to both a firm’s taxes and its operating activities, as we find that greater political hedging is associated with reduced cash effective tax rate volatility and pretax income volatility. We further find investors are better able to anticipate future earnings for firms that engage in political hedging, suggesting that political hedging helps improve firms’ information environments. Lastly, we perform an event study using President Obama’s Clean Power Plan. We find that on the days this policy proposal was debated in Congress, energy and utility firms experience heightened intra-day return volatility (relative to other firms and non-event days). However, this heightened volatility is mitigated for energy and utility firms that are more politically hedged. Overall, we conclude that political hedging is an effective risk management tool that helps mitigate firm risk.
The Majoritarian Threat to Liberal Democracy
Guy Grossman et al.
Journal of Experimental Political Science, forthcoming
Abstract:
Incumbents often seek to wield power in ways that are formally legal but informally proscribed. Why do voters endorse these power grabs? Prior literature focuses on polarization. We propose instead that many voters are majoritarian, in that they view popularly elected leaders’ actions as inherently democratic - even when those actions undermine liberal democracy. We find support for this claim in two original survey experiments, arguing that majoritarians’ desire to give wide latitude to elected officials is an important but understudied threat to liberal democracy in the United States.
Nationalization and Its Consequences for State Legislatures
Richard Burke
Social Science Quarterly, January 2021, Pages 269-280
Method: To measure nationalization I use election data as well as data on mass partisanship in a state. To measure a state's legislative agenda, I use data on legislative actions collected from LexisNexis. For my statistical analysis, I use two‐way linear fixed effects regression.
Results: I find that as nationalization increases, legislatures take less legislative actions pertaining to education, transportation, and localities. I also find that as nationalization increases, Republican‐controlled states increase the number of legislative actions related to abortion.
Automatic detection of influential actors in disinformation networks
Steven Smith et al.
Proceedings of the National Academy of Sciences, 26 January 2021
Abstract:
The weaponization of digital communications and social media to conduct disinformation campaigns at immense scale, speed, and reach presents new challenges to identify and counter hostile influence operations (IOs). This paper presents an end-to-end framework to automate detection of disinformation narratives, networks, and influential actors. The framework integrates natural language processing, machine learning, graph analytics, and a network causal inference approach to quantify the impact of individual actors in spreading IO narratives. We demonstrate its capability on real-world hostile IO campaigns with Twitter datasets collected during the 2017 French presidential elections and known IO accounts disclosed by Twitter over a broad range of IO campaigns (May 2007 to February 2020), over 50,000 accounts, 17 countries, and different account types including both trolls and bots. Our system detects IO accounts with 96% precision, 79% recall, and 96% area-under-the precision-recall (P-R) curve; maps out salient network communities; and discovers high-impact accounts that escape the lens of traditional impact statistics based on activity counts and network centrality. Results are corroborated with independent sources of known IO accounts from US Congressional reports, investigative journalism, and IO datasets provided by Twitter.
Why are grandiose narcissists more effective at organizational politics? Means, motive, and opportunity
Charles O'Reilly & Jeffrey Pfeffer
Personality and Individual Differences, forthcoming
Abstract:
Research over the past decade has shown that grandiose narcissists are often successful at attaining leadership positions in organizations. However, there is no evidence that narcissists lead higher performing firms, and while they see themselves as more competent leaders, there is no evidence for this, either. In fact, research shows that narcissistic leaders have numerous negative effects on the entities they lead. This raises a question: Why are narcissists so successful in attaining leadership positions? We suggest that the defining characteristics of grandiose narcissism (grandiosity, self-confidence, entitlement, and a willingness to exploit others for one's own self-interest) may make them more effective organizational politicians than those who are lower in narcissism. We report the results of three studies that show: (1) those higher in narcissism are more likely than those who are lower to see organizations in political terms (opportunity), (2) they are more willing to engage in organizational politics (motive), and (3) they are more skilled political actors (means). We discuss the implications of these results for organizational dynamics and career processes.
The Very Best People: President Trump and the Management of Executive Personnel
David Lewis & Mark Richardson
Presidential Studies Quarterly, forthcoming
Abstract:
To his supporters, one very attractive feature of Donald Trump's candidacy was his prior experience as a business executive. Trump promised that he would run America like a business and would select the very best people. In this article, we evaluate President Trump's approach to managing the executive branch by scrutinizing his approach to personnel. We reference two sources of important new data. We first examine data on nominations to all Senate‐confirmed positions during the last three presidencies. We also use data from the 2007, 2014, and 2020 (preliminary) Surveys on the Future of Government Service, surveys of thousands of appointed and career federal executives, to determine whether the president selected the very best people. We conclude by using the survey data to evaluate whether the president’s approach led to effective management. A close look at the new data reveals that the president has been slow to nominate officials to key positions. Federal executives rate the persons the president has appointed as less competent than appointees from the Bush administration or civil servants from the current one. The survey data also reveal that the president’s approach has done nothing to arrest the decline in the capacity of the public service. We conclude by discussing the implications of the Trump presidency for our traditional understanding of the president as chief executive. Specifically, we discuss whether we should reevaluate common beliefs about presidents caring inherently about the management of the executive.
Does Political Corruption Impede Firm Innovation? Evidence from the United States
Qianqian Huang & Tao Yuan
Journal of Financial and Quantitative Analysis, February 2021, Pages 213-248
Abstract:
We examine how local political corruption affects firm innovation in the United States. We find that firms located in highly corrupt areas are less innovative as measured by their patenting activities. The results are robust to the inclusion of a broad set of regional characteristics, instrumental variable analysis, matching analysis, difference-in-differences test, and alternative proxies for local corruption. Further analysis shows that reduced innovation incentives due to high extortion risk and decreased threat of competition could be the possible economic channels through which corruption affects innovation. Overall, our results indicate that local political corruption impedes corporate innovation in the United States.
Exposing the Revolving Door in Executive Branch Agencies
Logan Emery & Mara Faccio
Purdue University Working Paper, November 2020
Abstract:
We develop the first comprehensive mapping of the revolving door phenomenon in the U.S. by examining the work experience in executive branch agencies of 1,910,150 individuals covering top corporate positions in 373,011 unique firms. We document that the phenomenon is prevalent, with one out of every 15 firms, and one out of every three publicly traded firms, having at least one top employee with prior work experience in U.S. executive branch agencies. On average, former regulators are hired in response to or concomitant with increases in regulation as well as concomitant with more aggressive regulator behavior in the form of a higher incidence of fines. Firms headquartered in more corrupt states, firms seemingly more corruption-prone, and established violators receive benefits in the form of a reduction in the incidence of fines after hiring former regulators from fine-imposing agencies. In contrast, we do not observe other firms receiving benefits on average.
Do campaign contributions buy favorable policies? Evidence from the insurance industry
Alexander Fouirnaies & Anthony Fowler
Political Science Research and Methods, forthcoming
Abstract:
To learn about the effects of corporate campaign contributions, we study the potential influence of the insurance industry in US state politics. The insurance industry is one of the biggest players in state politics, and we have collected new data on objective measures of the industry's performance in each state over time. We exploit within-state changes in campaign finance regulations which can significantly restrict the ability of corporate contributors to give money and potentially influence elected officials. Across a range of outcomes and campaign finance reforms, we find little evidence that the ability to make corporate campaign contributions benefits the insurance industry in a state. Some results suggest that the ability to make campaign contributions may benefit the insurance industry in states with elected insurance commissioners, but overall, campaign contributions appear to have a little distortionary effect even in a setting where we would most expect to find it.
The consequences of political donations for IPO premium and performance
Dimitrios Gounopoulos, Khelifa Mazouz & Geoffrey Wood
Journal of Corporate Finance, forthcoming
Abstract:
This study explores the effect of directors' political contributions on IPOs' valuation and firm survival. We find that individual contributions by directors bring significant benefits to the IPO firms. Specifically, we show that political contributions of board members, particularly those of CEOs and founders, increase the IPO premium and the survivability of IPO firms. We find that the relationship between directors' political contributions and IPO premium is particularly strong among non-venture-backed firms, while the link between directors' political contributions and firm survival is more pronounced for venture-backed firms with strong corporate governance. Our findings are robust to endogeneity concerns and to alternative measures of political donations and IPO performance. Our results confirm the relevance of signaling and resource dependence theories.
Gender, Power, and Colleague Aggression in U.S. State Senates
Rebekah Herrick, Sue Thomas & Kate Bartholomy
Political Research Quarterly, forthcoming
Abstract:
In this paper, we present analysis of an original dataset of levels of colleague aggression among U.S. state senators, whether women senators face more of these behaviors than men, and whether numerical and positional gender inequality in state senates affects these relationships. The results indicate that, overall, colleague aggression in U.S. state senates is relatively rare, and, in general, women do not face more aggression than men. Under certain conditions, however, subsets of women senators experience more aggressive behaviors than their counterparts, male or female. Specifically, when they serve in senates with higher percentages of women or growing numbers of women, they are disproportionally targeted. There is also some evidence that women committee chairs are more likely than rank-and-file women to face this type of behavior.