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Stock Ownership and Political Behavior: Evidence from Demutualizations

Author

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  • Markku Kaustia

    (Aalto University, 00100 Helsinki, Finland)

  • Samuli Knüpfer

    (BI Norwegian Business School, 0484 Oslo, Norway; and Centre for Economic Policy Research, London EC1V 3PZ, United Kingdom)

  • Sami Torstila

    (Aalto University, 00100 Helsinki, Finland)

Abstract

A setting in which customer-owned mutual companies converted to publicly listed firms created a plausibly exogenous increase in stock ownership. We use this shock to identify the effect of ownership of publicly listed shares on political behavior. Using instrumental variable regressions, difference-in-differences analyses, and matching methods, we find the shock changed the way people vote in the affected areas, with the demutualizations being followed by a 1.7–2.7-percentage-point increase in right-of-center vote share. Analyses of demutualizations that did not involve public listing of shares suggest that explanations based on wealth, liquidity, and tax-related incentives do not drive the results, and that the ownership of publicly listed shares was instrumental in generating the increase in conservative voting. This paper was accepted by Gustavo Manso, finance.

Suggested Citation

  • Markku Kaustia & Samuli Knüpfer & Sami Torstila, 2016. "Stock Ownership and Political Behavior: Evidence from Demutualizations," Management Science, INFORMS, vol. 62(4), pages 945-963, April.
    • Handle: RePEc:inm:ormnsc:v:62:y:2016:i:4:p:945-963
    DOI: 10.1287/mnsc.2014.2135
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    More about this item

    Keywords

    stock ownership; political behavior; salience; attention; identity;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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