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Press release

Berlin, November 8, 2016

ESMT Berlin studies show US election campaigns increasingly financed by large corporations

  • Decision of Supreme Court in 2010 liberalizes campaign donations
  • Public pension funds defy the trend

New research by Prof. Jörg Rocholl, president of ESMT Berlin, demonstrates that US election campaigns are increasingly financed by campaign donations of financially strong corporations. His current study “Institutional Investors and Corporate Political Activism”, conducted in collaboration with Rui Albuquerque, Boston College; Zicheng Lei, University of Surrey; and Chendi Zhang, University of Warwick, examines over 1,700 companies and their donations to Democrats and Republicans.

Jörg Rocholl’s research shows that companies report positive market returns after the Citizens United ruling in 2010 if they have few institutional investors and particularly no public pension funds, such as funds of the federal states, as investors.

Since the Citizens United decision of the Supreme Court in 2010, limits for electoral campaign financing have been shifted. Super political action committees (Super PACs) are allowed to raise an unlimited amount of donations from corporations, organizations, and individuals if they stay independent from the candidates. This liberalization of campaign donations has resulted in considerable means for campaign advertising provided by financially powerful companies.

The results of this research further underline that politics and business are closely intertwined in the US, which is also reflected in market returns. “The study raises the question of the extent to which an elected president feels committed to its sponsors and has to serve their interests after the election,” commented Jörg Rocholl.

In the past, the president of ESMT has published research examining the link between politics and business in the US. His study “Do Politically Connected Boards Affect Firm Value?” (2009) showed that political connections of board members of S&P 500 companies to the Republican Party or Democratic Party affect their company values.

Jörg Rocholl’s further study “Politically Connected Boards of Directors and The Allocation of Procurement Contracts” (2013) examines the extent of allocated government procurement contracts in the US. The results demonstrate that these contracts are highly dependent on the political connections of a company. “After the win of the Republicans in the elections, it became clear that companies with connections to the Republicans benefited, while the companies with connections to the Democrats closed fewer contracts,” summarized the economist.

Links to the studies:

About ESMT Berlin

ESMT Berlin was founded by 25 leading global companies and institutions. The international business school offers a full-time MBA, an executive MBA, an executive MBA/MPA, a master’s in management, as well as open enrollment and customized executive education programs. ESMT focuses on three main topics: leadership and social responsibility, European competitiveness, and managing technology. ESMT faculty publishes in top academic journals. Additionally, the business school provides an interdisciplinary platform for discourse between politics, business, and academia. The business school is based in Berlin, Germany, with Schloss Gracht as an additional location near Cologne. ESMT is a private business school with the right to grant PhDs and is accredited by the German state, AACSB, AMBA, EQUIS, and FIBAA. www.esmt.org