Spillover Effects of Political Connectedness and Corporate Social Responsibility: Evidence From the Trump Administration

Abstract

This paper does not argue for or against President Trump. Rather, it examines potential spillover from a mutually exclusive choice between political connectedness and corporate social responsibility (CSR). We find that a firm’s investment in political connectedness with Trump (in CSR) causes the stock prices of rival firms to increase (decrease), suggesting spillover. A rational interpretation of the results follows. As human beings, shareholders do value CSR. At the same time, they consider the marginal benefits and marginal costs of each investment type in a given situation and invest accordingly.