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Corporate Policies of Republican Managers

Published online by Cambridge University Press:  08 April 2015

Irena Hutton ,
Danling Jiang  and
Alok Kumar
Irena Hutton
Affiliation:
[email protected], College of Business, Florida State University, PO Box 3061110, Tallahassee, FL 32306
Danling Jiang
Affiliation:
[email protected], College of Business, Florida State University, PO Box 3061110, Tallahassee, FL 32306
Alok Kumar
Affiliation:
[email protected], School of Business Administration, University of Miami, PO Box 248027, Coral Gables, FL 33124.
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Abstract

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We demonstrate that personal political preferences of corporate managers influence corporate policies. Specifically, Republican managers who are likely to have conservative personal ideologies adopt and maintain more conservative corporate policies. Those firms have lower levels of corporate debt, lower capital and research and development (R&D) expenditures, less risky investments, but higher profitability. Using the 9/11 terrorist attacks and Sept. 2008 Lehman Brothers bankruptcy as natural experiments, we demonstrate that investment policies of Republican managers became more conservative following these exogenous uncertainty-increasing events. Furthermore, around chief executive officer (CEO) turnovers, including CEO deaths, firm leverage policy becomes more conservative when managerial conservatism increases.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 49 , Issue 5-6 , December 2014 , pp. 1279 - 1310
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2015 

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