This study explores whether firms adjust their liquidity in response to heightened uncertainty and expropriation risk associated with populism. Using an event study approach, we consistently find that firms reduce their cash holdings during periods of populism, supporting the expropriation hypothesis. Smaller firms, innovating firms, and firms that operating in politically sensitive industries experience larger…
We examine the roles of commercial bank ownership and CEO faction membership in facilitating or in hindering the implementation of central bank policy in China. Both ownership and membership matter: provincial or city government-owned banks whose CEOs are members of a generalist faction within the Chinese Communist Party (CCP) respond least to People’s Bank of…
This year’s edition of the CEPR Conference Series on the Political Economy of Finance took place in the beautiful Wereldmuseum in Rotterdam. This edition gathered a great lineup of scholars to discuss frontier research on the interactions between firms’ political power, their stakeholders and society at large. One of the highlights of the conference was…
We formalize Zingales’ (2017) argument about the link between corporate economic characteristics and political influence in a setup that exhibits an inverse relationship between citizens’ participation in production and the protection offered to citizens who participate. In this setup, driven by citizens whose participation in production necessitates low protection, democracy may fail to offer protection…
A first-order concern regarding sustainable finance is that it may crowd out individual support for more effective, policy-driven approaches to address societal challenges. We test the validity of this concern in a pre-registered experiment in the context of a real referendum on a climate law with a representative sample of the Swiss population (N=2,051). We…
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…