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Personal financial incentives, corporate governance, and firms’ campaign contributions

Author

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  • Fedaseyeu, Viktar
  • Lvovskiy, Lev

Abstract

We find that corporate governance and executives’ personal financial incentives are important determinants of firms’ ability to extract benefits from political participation. Firms with more independent boards are more likely to establish corporate political action committees (PACs), and executives in such firms exhibit a stronger sensitivity of campaign contributions to their personal equity stakes. We also show that disperse ownership limits PACs’ ability to raise funds because even large firm-level benefits from political participation may become insignificant for individuals with small equity stakes. This may help explain why aggregate PAC contributions remain relatively small compared to the large firm-value benefits such contributions can provide. However, the negative effect of disperse ownership on political donations is mitigated by corporate governance, as well-governed firms are able to better align their managers’ incentives with the benefits from corporate political participation.

Suggested Citation

  • Fedaseyeu, Viktar & Lvovskiy, Lev, 2025. "Personal financial incentives, corporate governance, and firms’ campaign contributions," Journal of Corporate Finance, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:corfin:v:91:y:2025:i:c:s092911992400186x
    DOI: 10.1016/j.jcorpfin.2024.102724
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    More about this item

    Keywords

    Political contributions; Corporate governance; Individual financial incentives; Corporate PACs; Corporate political influence;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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