Transparent politics: Political ideology,lobbying and firm performance

Abstract

This study juxtaposes agency theoretic concepts with the stakeholder management and political marketplace perspectives to explore how corporate political transparency alters the targeting of corporate political activity expenditures and the performance benefits of corporate political activity to the firm. We examine the alignment of CEO political ideology and political action campaign expenditures, showcasing they are a potential agency cost to the firm and stakeholders. Next, we hypothesize that corporate political transparency reduces this alignment. We then explore how corporate political transparency helps firms accrue value from lobbying expenditures by showcasing that firms elicit greater firm performance from lobbying expenditures at higher levels of corporate political transparency. As such, we demonstrate that agency costs at least partially influence the relationship between corporate political activity and firm performance and that corporate political transparency is critical to reducing it. Thus, corporate political transparency provides some benefits and has practical applications for firm performance.