DP11301 Public Pension Funds and Corporate Political Activism

Author(s): Rui Albuquerque, Zicheng Lei, Jörg Rocholl, Chendi Zhang
Publication Date: May 2016
Date Revised: June 2017
JEL(s): G3
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11301

This paper analyzes agency conflicts between U.S. public pension funds and other shareholders. It studies the landmark decision by the U.S. Supreme Court on Citizens United v. FEC, which opens new doors for political activism by business. At the ruling, politically connected firms held by public pension funds have lower announcement returns. After the ruling, these firms remain engaged in political connections and experience a relative increase in ownership by public pension funds. Our evidence is consistent with public pension funds having a preference for more traditional forms of political activism, a preference not shared by other investors.