Direct Democracy, Corporate Political Strategy, and Firm Value

We analyze a novel data set of corporate contributions to ballot initiatives and referendums at the U.S. state level. Firms make significant contributions to ballot measures in favor of or against specific initiatives. Firms that contribute to successful (failed) direct initiated state initiatives exhibit significantly positive (negative) CARs around the election. They also experience significant sales, investment, and net income growth in the two years following the passage of important ballot measures. The results suggest that ballot measure spending represents a distinct and economically important dimension of firms’ political strategy with important consequences for firm value and real activity.