Presidential Power and Shareholder Wealth

Child, Travers Barclay; Massoud, Nadia; Schabus, Mario; Zhou, Yifan

doi:10.2139/ssrn.3125228

Cited by 2 publications

(2 citation statements)

References 48 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Consider, for example, the Fukushima earthquake in 2011, which damaged a nearby nuclear power plant and Knight [2006] for an analysis of the impact of the 2000 U.S. presidential election on stock prices. For event studies focused on the 2016 election, see Wagner et al [2018a] and Massound and Zhou [2018].…”

Section: Introductionmentioning

confidence: 99%

An Event Long-Short Index: Theory and Applications

Fisman

Zitzewitz

2019

American Economic Review: Insights

View full text Add to dashboard Cite

We propose a stock market-based measure to capture initial beliefs about an event’s effect on firm profits, which may be used to measure whether initial expectations are subsequently realized. Our “Event Long-Short Index” is the difference in market-capitalization-weighted returns of firms that outperform versus underperform the market on the event date. We use post-event index returns to measure whether initial beliefs are reinforced or attenuated. We apply our approach to the 2016 US presidential election and Brexit referendum to illustrate the index and its interpretation and to validate it, showing that it moves as expected following subsequent political and business news. (JEL D22, D72, D83, G14, L25)

show abstract

Section: Introductionmentioning

confidence: 99%

An Event Long-Short Index: Theory and Applications

Fisman

Zitzewitz

2019

American Economic Review: Insights

View full text Add to dashboard Cite

show abstract

“…To the extent that such political influence may be employed to exploit revenue growth opportunities (Hillman, Keim and Schuler, 2004) or influence policymaking and regulation (Oliver and Holzinger, 2008), the effect of political connections should be positive for shareholders. Many empirical studies corroborate the existence of a positive effect on shareholder value from the appointment of a politically connected individual in the USA (Acemoglu et al, 2016;Child et al, 2020;Goldman, Rocholl and So, 2009;Luechinger and Moser, 2014). Overall, we expect the resignations from the advisory councils to have triggered a negative response from shareholders only partially mitigated by any potentially positive effects of the advocacy itself: H1: Shareholders react negatively to CEOs' resignation from presidential councils both in absolute and relative terms compared to firms whose CEOs remain on the councils.…”

Section: Ceo Activism and Firm Valuementioning

confidence: 64%

To Advocate or Not to Advocate: Determinants and Financial Consequences of CEO Activism

Bedendo

Siming

2020

British J of Management

View full text Add to dashboard Cite

Chief executive officers (CEOs) who engage in activism take public stands on issues that are largely unrelated to the core business of their firms. This study assesses the impact of CEO activism on shareholder value and investigates potential drivers behind the decision to advocate. We conduct an event study centred on a particular episode of CEO activism: the resignation of a group of business leaders from their roles as advisors to President Trump. We choose this setting since activism is likely to have a stronger impact when a CEO is politically connected. However, by engaging in advocacy, a CEO risks severing the very same political links that underlie the strength of the message. We find that shareholders react negatively to the decision to quit a presidential advisory council, which is consistent with a fear of weakening their firm's political influence. The decision to publicly advocate seems to be driven more by a CEO's personal political ideology than by a company's general involvement in corporate social responsibility. We also observe that managers are more likely to take a stand when they are protected by their firm's corporate governance rules. This study provides empirical evidence of the risks associated with CEO activism.

show abstract

Presidential Power and Shareholder Wealth

Cited by 2 publications

References 48 publications

An Event Long-Short Index: Theory and Applications

An Event Long-Short Index: Theory and Applications

To Advocate or Not to Advocate: Determinants and Financial Consequences of CEO Activism

Contact Info

Product

Resources

About