Going Extreme: The Impact of Political Polarization on Corporate Investment

15:30-17:00, Friday, December 1, 2023

I-206, Boxue Building, DUFE

Dr. Tiecheng Leng is now Professor of Finance at School of Management, Harbin Institute of Technology. He earned his Ph.D. in Finance from Singapore Management University in 2015. His research interests include Corporate Finance, Economics of Entrepreneurship and Politics and Finance. He has his paper published in Management Science. His working papers on political uncertainty and sharing economy are currently R&R at RFS (3rd round) and JCF (2nd round) respectively

Using data on roll-call voting patterns of U.S. state legislators from 1993 to 2016, we find a negative relationship between firm investment and state legislative polarization, measured as the ideological distance between the Democratic and Republican party medians. An increase of one standard deviation in the average within-state polarization leads to a 4.5% reduction in firm investment rates, controlling for growth opportunities and economic conditions. In response to heightened political polarization, firms are more likely to move their corporate headquarters to less polarized states. We find that polarized states have lower passing rates for legislative bills and higher volatility in economic policy, suggesting that legislative gridlock and policy instability may be two possible mechanisms through which polarization affects firm decisions. Our paper provides new insights into the real effects of political polarization.

For more information of the seminar, scan the following QR code(s) to join Tencent QQ group (904 544 292) or WeChat group named "IAER Seminar (4)", please.

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(QR code is valid until 6/12/2023)