The Implications of Corporate Political Activism and Governance

Authors

Marcos Velazquez, Florida International UniversityFollow

Document Type

Dissertation

Degree

Doctor of Philosophy (PhD)

Major/Program

Business Administration

First Advisor's Name

Arun Upadhyay

First Advisor's Committee Title

Commitee Chair

Second Advisor's Name

Edward Lawrence

Second Advisor's Committee Title

Committee Member

Third Advisor's Name

Suchismita Mishra

Third Advisor's Committee Title

Committee Member

Fourth Advisor's Name

Ozde Oztekin

Fourth Advisor's Committee Title

Committee Member

Fifth Advisor's Name

Manjul Gupta

Fifth Advisor's Committee Title

Committee Member

Keywords

Lobbying, Governance, Overconfident CEOs, Regulatory Violations, Carbon Emissions

Date of Defense

6-16-2022

Abstract

This dissertation is comprised of three essays that study corporate political activism through the lens of corporate governance. The first essay examines how CEO overconfidence, moderated by CEO power, drives lobbying expenditures. The findings suggest that neither variable by itself affects lobbying outlays. However, it is the interaction between such characteristics that increases lobbying activity. Executives exhibiting above-average overconfidence who also chair the board tend to spend 36% more in lobbying. Ensuing firm performance is examined to establish whether the surge is in line with stewardship or agency conflict paradigms. There is limited evidence of improved valuations due to lobbying on the part of firms with overly optimistic, highly entrenched managers. Yet there is enhanced profitability from sustained lobbying by firms with overconfident, powerful CEOs. Therefore, stewardship theory is a likely explanation for lobbying on the part of overconfident, powerful CEOs.

The second essay suggests that firms experiencing a 1% increase in regulatory sanctions tend to increase lobbying expenditures by 14% during the following year. Oversight induces political activism more forcefully when related to employment or environmental rules infringements, enforced at the federal level, or prosecuted under civil law. The relationship is moderated by a firm’s profitability, information asymmetry, board structure, executive pay disposition, and capital structure. Such channels support both stewardship and agency conflict explanations, implying that the motivation to lobby is nuanced.

The third essay shows that firms that lobby the U.S. government emit over 60% more greenhouse gasses in other countries. The result agrees with a pessimistic interpretation of the environmental Kuznets curve. The theorized decline in emissions ensuing from a benchmark level of wealth does not necessarily follow improvements in technology and a shift in demand for a better environment. Rather, the evidence fits a strategy in which firms simultaneously advocate for lesser environmental standards at home and increase emissions abroad. The effect is contingent on firm value, agency costs, managerial incentive compensation, and total compensation. Offshore emissions flow towards countries characterized by political instability and an adverse economic forecast. Additionally, lobbying firms based in Republican-leaning states have greater foreign emissions.

Identifier

FIDC010738

Recommended Citation

Velazquez, Marcos, "The Implications of Corporate Political Activism and Governance" (2022). FIU Electronic Theses and Dissertations. 5060.
https://digitalcommons.fiu.edu/etd/5060