Political catastrophe and firm strategies: Evidence from the capitol riot

This study explores firms' reactions to the 2021 U.S. Capitol Attack. We find that firms donating more to the 147 Republicans who voted to overturn the 2020 presidential election are more likely to speak out against the Capitol Attack to suspend political contributions. By doing so, firms mitigate negative stock market reactions and subsequently lower their political risk. Suspension of corporate political donations has profound impacts on the 147 Republicans that they almost lost all political contributions from private sectors right after the Capitol Attack. Our findings suggest that, when facing unexpected political catastrophes, firms make strategic political activist actions.

Automated summary

This study examines firms' responses to the 2021 U.S. Capitol Attack and finds that companies that donated more to the 147 Republicans who supported overturning the 2020 presidential election are more likely to publicly condemn the attack and suspend political contributions. By doing so, firms can mitigate negative stock market reactions and reduce their political risks. The suspension of corporate political donations has significant implications for the 147 Republicans as they almost lost all private sector political contributions following the Capitol Attack. The findings suggest that firms take strategic political actions when facing unexpected political crises.