Policy Uncertainty and the Dual Role of Corporate Political Strategies

Authors

Chansog Francis Kim
Incheol Kim, The University of Texas Rio Grande ValleyFollow
Christos Pantzalis
Jung Chul Park

Document Type

Article

Publication Date

6-2019

Abstract

Firms use active political strategies not only to mitigate uncertainty emanating from legislative activity, but also to enhance their growth opportunities. We find that a firm's systematic risk (beta) can be hedged away by employing various political strategies involving the presence of former politicians on corporate boards of directors, contributions to political campaigns, and corporate lobbying activities. The hedging effect is greater when firms operate in more uncertain industries. In addition, active political strategies are associated with greater firm heterogeneity and make real options more value relevant as potential drivers of competitive advantages in uncertain environments.

Comments

Original published version available at https://onlinelibrary.wiley.com/share/YBJERDBQPYVWTDWWK338?target=10.1111/fima.12226

Publication Title

Financial Management

DOI

10.1111/fima.12226

Recommended Citation

Kim, C., Kim, I., Pantzalis, C. and Park, J.C., 2019. Policy uncertainty and the dual role of corporate political strategies. Financial Management, 48(2), pp.473-504. https://doi.org/10.1111/fima.12226