Year: 2023
Type: article
Abstract: I show that an alignment in partisan affiliation, between a firm’s management and the president, is associated with higher levels of investment. Using insider trading data, I find that managers become more optimistic about their companies’ prospects when their preferred party is in power. This optimism-driven increase in investment is amplified by herding and associated with both lower profitability and stock returns. Overall, managers’ political beliefs produce heterogeneous expectations about future cash flows and distort investment decisions.
Author: Anthony B. Rice
Institution: Chinese University of Hong Kong
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,255
OpenAlex ID: W4366987012