Corporate strategy, political contributions and corporate risk-taking

Halari, Anwar, Ahmad, Sardar ORCID: 0000-0002-9745-808X, Ullah, Subhan and Amankwah-Amoah, Joseph
(2023) Corporate strategy, political contributions and corporate risk-taking. CORPORATE GOVERNANCE-THE INTERNATIONAL JOURNAL OF BUSINESS IN SOCIETY, 23 (7). pp. 1484-1505.

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<jats:sec> <jats:title content-type="abstract-subheading">Purpose</jats:title> <jats:p>Despite the importance and prevalence of corporate political activities in modern organizations, there remains limited insight on the potential relationship between political contributions and companies’ risk-taking activities. This study aims to examine the relationship between monetary political contributions of firms and corporate risk-taking activities in the context of unstable political and economic environments.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title> <jats:p>The authors use a two-step system GMM estimation to investigate the subject using a cross-country sample of 307 firms from 22 countries covered over 2002–2017. In line with previous studies, the authors control for various corporate governance mechanisms, firm-level factors and country-level characteristics.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Findings</jats:title> <jats:p>The findings demonstrate that firms that make monetary political contributions exhibit lower levels of risk as measured by different proxies for risks, namely, systematic, idiosyncratic and total risk.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Practical implications</jats:title> <jats:p>The results suggest that political contributions can be a useful mechanism to mitigate risk exposure. Also, the use of different risk measures and other factors for robustness fosters a better understanding of political connectedness in a more contextualized and dynamic manner.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Originality/value</jats:title> <jats:p>This study seeks to contribute to the debate surrounding corporate strategy, political connectedness and corporate risk-taking by using actual monetary political contributions as an explicit measure of political connection. This study furthers scholarly understanding on the dynamics of corporate political activities using political contributions in monetary terms as a measure of political connectedness and its impact on risk-taking. Furthermore, the authors explore this topic using insights from nonmarket strategy literature and studies on political contributions.</jats:p> </jats:sec>

Item Type: Article
Additional Information: Source info: MULFIN-D-22-00172
Uncontrolled Keywords: Corporate governance, Political connections, Risk-taking, Political contribution
Divisions: Faculty of Humanities and Social Sciences > School of Management
Depositing User: Symplectic Admin
Date Deposited: 28 Mar 2023 07:59
Last Modified: 13 Nov 2023 05:24
DOI: 10.1108/CG-07-2022-0310
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