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Is corporate political activity an investment or agency? an application of system GMM approach

Corporate political activity (CPA) has been recognized as bearing a significant impact on financial performance (FP). Nevertheless, there has been a lack of considerable research to date. The results of the research regarding the relationship between CPA and FP have been contradictory and this has n...

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Main Author: Lin, Woon Leong
Format: Article
Language:English
Published: MDPI 2019
Online Access:http://psasir.upm.edu.my/id/eprint/77895/1/77895.pdf
http://psasir.upm.edu.my/id/eprint/77895/
https://www.mdpi.com/2076-3387/9/1/5
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spelling my.upm.eprints.778952020-05-04T17:37:16Z http://psasir.upm.edu.my/id/eprint/77895/ Is corporate political activity an investment or agency? an application of system GMM approach Lin, Woon Leong Corporate political activity (CPA) has been recognized as bearing a significant impact on financial performance (FP). Nevertheless, there has been a lack of considerable research to date. The results of the research regarding the relationship between CPA and FP have been contradictory and this has necessitated further investigation of this relationship. Nonetheless, rather than examining the relationship between CPA and FP, research scholars have revealed that a contingency perspective must be employed for revealing the conditions and the context which enhance the relationship between these two constructs. This study offers a quite distinctive viewpoint with respect to the link between CPA and FP as regards the corporate reputation perspective. For this reason, the study obtained data from the Fortune list of top 100 World Most Admired Companies (WMAC) for the period of 2007 and 2016. This data was utilized to examine the relationship between CPA and FP using the dynamic panel data system GMM (Generalized Method of Moments) estimator. This study finds virtually no support for the hypothesis that lobbying and PACs (political action committees) represent an investment in political capital. Instead, CPA is symptomatic of agency problems within firms. This study also argues that corporate reputation moderates the effect of CPA on the FP and the analysis supports the argument. Our results are particularly useful in light of the reputable corporation, which is greatly to likely increase the use of corporate funds for political contributions. MDPI 2019 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/77895/1/77895.pdf Lin, Woon Leong (2019) Is corporate political activity an investment or agency? an application of system GMM approach. Administrative Sciences, 9 (1). art. no. 5. pp. 1-22. ISSN 2076-3387 https://www.mdpi.com/2076-3387/9/1/5 10.3390/admsci9010005
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description Corporate political activity (CPA) has been recognized as bearing a significant impact on financial performance (FP). Nevertheless, there has been a lack of considerable research to date. The results of the research regarding the relationship between CPA and FP have been contradictory and this has necessitated further investigation of this relationship. Nonetheless, rather than examining the relationship between CPA and FP, research scholars have revealed that a contingency perspective must be employed for revealing the conditions and the context which enhance the relationship between these two constructs. This study offers a quite distinctive viewpoint with respect to the link between CPA and FP as regards the corporate reputation perspective. For this reason, the study obtained data from the Fortune list of top 100 World Most Admired Companies (WMAC) for the period of 2007 and 2016. This data was utilized to examine the relationship between CPA and FP using the dynamic panel data system GMM (Generalized Method of Moments) estimator. This study finds virtually no support for the hypothesis that lobbying and PACs (political action committees) represent an investment in political capital. Instead, CPA is symptomatic of agency problems within firms. This study also argues that corporate reputation moderates the effect of CPA on the FP and the analysis supports the argument. Our results are particularly useful in light of the reputable corporation, which is greatly to likely increase the use of corporate funds for political contributions.
format Article
author Lin, Woon Leong
spellingShingle Lin, Woon Leong
Is corporate political activity an investment or agency? an application of system GMM approach
author_facet Lin, Woon Leong
author_sort Lin, Woon Leong
title Is corporate political activity an investment or agency? an application of system GMM approach
title_short Is corporate political activity an investment or agency? an application of system GMM approach
title_full Is corporate political activity an investment or agency? an application of system GMM approach
title_fullStr Is corporate political activity an investment or agency? an application of system GMM approach
title_full_unstemmed Is corporate political activity an investment or agency? an application of system GMM approach
title_sort is corporate political activity an investment or agency? an application of system gmm approach
publisher MDPI
publishDate 2019
url http://psasir.upm.edu.my/id/eprint/77895/1/77895.pdf
http://psasir.upm.edu.my/id/eprint/77895/
https://www.mdpi.com/2076-3387/9/1/5
_version_ 1665896046475083776
score 13.211869

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