Matilde Bombardini, University of California-Berkeley
Raymond Fisman, Boston University
Francesco Trebbi, University of California-Berkeley
Eyub Yegen, Hong Kong University of Science and Technology
Abstract: Institutional ownership of U.S. corporations has increased ten-fold since 1950. We examine whether these new concentrated owners influence portfolio firms’ political activities, as a window into the larger question of whether institutional investors can wield their control to extract benefits from portfolio firms. We find that after the acquisition of a large stake, a firm’s political action committee (PAC) giving mirrors more closely that of the acquiring investment management company (in our preferred specification, a 31 percent increase in co-movement). This pattern is observed for acquisitions driven by new index inclusions, which suggests that our findings result from a causal effect of acquisitions rather than other correlated shifts in political agendas. We argue that investors drive the convergence in giving - the effects are driven by more “partisan” investors, and we show that firms shift their giving more around acquisitions than investors do. Overall, our findings suggest that corporations’ political business strategies are likely dictated by broader considerations than simple profit, and modeling corporate influence should take into account how corporations are governed.
Discussant: Ekaterina Neretina, Bocconi University
Huasheng Nie, University of California-Los Angeles
Abstract: Boards of U.S. public firms have shown progress in demographic diversity, but little progress in diversity of experience, skill, institutions, and viewpoints (proxied by political stance). The addition of directors who contribute to demographic diversity also contributes positively to experience and skill diversity, but has an asymmetric effect on viewpoint diversity. The addition of demographically diverse directors is associated with an increase (decrease) in political stance diversity among boards that were dominated by directors leaning Republican (Democratic), resulting in ``bluer'' boards for both groups. The asymmetric effect on viewpoint diversity cannot be explained by the availability of candidates of varying political stances. Finally, experience and skill diversity emerge as the most critical factors of boards in guiding firms through the unforeseen COVID-19 crisis.
Abstract: We study how stakeholder orientation impacts firm management and per- formance. We exploit state-level law changes governing the conversion of hospitals from non- profit to for-profit and find that for-profit orientation reduces hospital spending on emergency rooms, Medicaid patients, and social workers, while increasing focus on revenue. Consistent with spillovers, nonprofit hospitals located near converting hospitals experience increased emergency room visits and expenditures. Finally, we investigate governance channels that align corporate behavior with stakeholders and find that converted for-profit hospitals adjust boards by replacing MDs with MBAs, and that the tax code is a major source of governance for nonprofit hospitals.
Discussant: Tong Liu, Massachusetts Institute of Technology
