Corporate Political Activity and Asset Pricing

35 Pages Posted: 7 Dec 2006

See all articles by Brett W. Myers

Brett W. Myers

Texas Tech, Rawls College of Business

Date Written: November 17, 2005

Abstract

This study considers the implications of corporate political activity and political risk on asset pricing. Firms which operate an affiliated political action committee (PAC) outperform firms that do not. Among firms that operate a PAC we find that those that spend relatively less on politics outperform those that spend more and that political risk is successfully hedged by firms that are relatively more politically active than their peers. The difference in performance is largely (but not entirely) explained by exposure to systematic political risk, and there is a component to political risk that is orthogonal to commonly considered risk factors.

Keywords: Political risk, asset pricing, stock returns, political connections, political action committees

JEL Classification: G12, G28

Suggested Citation

Myers, Brett W., Corporate Political Activity and Asset Pricing (November 17, 2005). Available at SSRN: https://ssrn.com/abstract=950104 or http://dx.doi.org/10.2139/ssrn.950104

Brett W. Myers (Contact Author)

Texas Tech, Rawls College of Business ( email )

Lubbock, TX 79407
United States