The Influence of the Political Orientation of CEO on Corporate Policies：Evidence from US listed companies between 1979 to 2018

Abstract

The paper studies the influence of the CEOs’personal political orientation on corporate policies. This paper uses 1089 CEOs who made political contributions to political parties from 1979 to 2018 to conduct a fixed-effect regression analysis. The results show that compared with Democratic CEOs, Republican CEOs with conservatism will adopt and maintain more conservative corporate policies. To be specific, these companies have lower levels of corporate debt and lower capital and research and development (R&D) outlay, less venture investment but higher profitability. Then it used the 9/11 terrorist attacks and Lehman Brothers bankruptcy in September 2008 as natural experiments to show that managerial conservatism has a direct causal effect on corporate policy. That is, the investment policies of Republican CEOs became more conservative following these external uncertainties increased.