Manager political preferences and company investor bases

We investigate how the personal political preferences of top managers shape the investor base of firms. Based on the risk-aversion attitude of firm decisions that rely on conservative political ideologies, we find that Republican managers tend to maintain a lower leverage level; invest less in tangible assets and R&D to pursue near-term profitability; and maintain a high quality of information disclosure to increase stock liquidity. We demonstrate that firms led by Republican managers can attract more transient institutions. This relationship becomes stronger during financially stressful periods and is robust after considering the moderating role of managerial discretion and potential endogeneity.