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Firm-level political uncertainty, corporate lobbying and risk-taking

Author

Listed:
  • Lukas Timbate

    (Kyungsung University)

  • Dongil Kim

    (Pusan National University)

  • Dereje Asrat

    (Bahirdar University)

  • Hwang Sungjun

    (Pusan National University)

Abstract

Prior research shows that political uncertainty affects general economic and firm-related outcomes. However, little is known about how firm-specific political uncertainty is related to corporate risk-taking. Taking advantage of a recent construct and using a large sample of non-financial U.S. firms covering the period between 2002 and 2021, we find compelling evidence that firm-specific political uncertainty is positively related to corporate risk-taking, especially for larger firms. On average, a one standard deviation rise in the level of political risk at the firm-level results in a 2.53% increase in risk-taking. Further analysis shows that the impact of firm-level political uncertainty on corporate risk-taking is more pronounced for firms that spend more on corporate lobbying. Our results are significant and robust to alternative risk-taking measures and endogeneity tests.

Suggested Citation

  • Lukas Timbate & Dongil Kim & Dereje Asrat & Hwang Sungjun, 2024. "Firm-level political uncertainty, corporate lobbying and risk-taking," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.
    • Handle: RePEc:pal:palcom:v:11:y:2024:i:1:d:10.1057_s41599-024-02824-w
    DOI: 10.1057/s41599-024-02824-w
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