This paper analyzes the effect that the U.S. Supreme Court’s landmark decision on Citizens United
vs. FEC had on corporate political activism. The decision opened the door for corporate treasuries
to engage in independent political spending. Politically connected firms have lower announcement
returns at the ruling than non-connected ...
This paper analyzes the effect that the U.S. Supreme Court’s landmark decision on Citizens United
vs. FEC had on corporate political activism. The decision opened the door for corporate treasuries
to engage in independent political spending. Politically connected firms have lower announcement
returns at the ruling than non-connected firms. The estimates suggest that the value of a political
connection decreases by $6.9 million. To evaluate the effect of Citizens United on corporate
political activism, we explore the fact that Citizens United also lifts bans on independent political
spending in states where such bans existed. After the ruling, firms headquartered in states where
bans are lifted have fewer state-level connections relative to firms in other states. Overall, our
evidence supports the hypothesis that independent political spending crowds out political
connections. We do not find any significant crowding-out effects of independent political
expenditures on lobbying activity, executive contributions, and political action committees (PAC)
contributions.