A firm-level Analysis of Political Donations and their Impact on Firms' ESG Ratings
Date of Award
ESG, Firm performance, political donation, political connectedness, political connection, environmental, credit, research, research and development
This paper aims to explore the interactions between firm-level political connection, environmental, social, and governance (ESG) score, and firms' changes in portfolio allocation toward research and development (R&D). The main question this paper investigates is how being a politically connected firm affects a firm's ESG score through changes in expenditure towards R&D. Through the use of a two-way linear fixed effect model, a firm's political donation amount and change in allocation towards R&D will be used to see the change in ESG. Additionally, a regression analysis will be conducted to investigate an interaction variable that will be used to see how donations, when interacted with R&D change, has effects on ESG. The data set hand-collected primary data, deriving information publicly available via Bloomberg data as well as data harvested via OpenSecrets- a nonprofit that tracks campaign finance and lobbying. The data's main variables of interest include firm-level financial statements and includes relevant information such as the number of employees, price earning ratios, revenue, and an ESG disclosure score. Through use of a panel data set and analysis at the firm level on years of interest (two-year intervals relevant to American presidential elections and midterms), a two-way fixed effects panel regression presents inconclusive results supporting the motivation to grow the data set and continue possible deeper understanding of the subject.
Wurts, Andrew James, "A firm-level Analysis of Political Donations and their Impact on Firms' ESG Ratings" (2023). Honors Theses. 2775.
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