Sukrit Singh Puri

While businesses benefit from political connections, it is also well known that businesses often seek to hide their political activities. Obfuscating is not costless, which implies firms must believe there is value to hiding their political activities. This paper attempts to estimate this value by exploiting a unique setting where the Election Commission of India suddenly revealed a list of previously-anonymous corporate donors to political parties. Publicly listed companies revealed to be political donors experienced a 4% cumulative abnormal underperformance over the next 7 days as a result of this information shock, amounting to an erosion of approximately $24 billion in market capitalization--over 12 times what was raised by political parties in the first place. The highly publicized nature of this reveal and the sharp uptick in trading volume suggests this effect was driven by an air of public scandal that disproportionately hit the reputations of large donor companies.

In documenting the ways corporations wield instrumental power over the state to extract returns, scholars treat business as a most likely case of an economically rational actor in the political arena. These theories tend to ignore how corporate structure affects a firm's political strategy. In this paper, I focus on the family business, the most common corporate form in the world, and show how it faces a series of non-economic incentives that distorts its politics. I borrow from finance and economic sociology to develop a political theory of family firms that predicts family firms deviating from short-run profit seeking behavior in the political arena, and exhibiting strong co-ethnic preferences instead. In order to test these theories, I assemble the universe of corporate campaign contributions to political parties in India from 2003-2021. Despite operating in a competitive multi-party environment, I find family involvement in firm operations is strongly associated with firms loyally supporting a single co-ethnic political party, without clear expectation of short-term economic return.