Law and Economics Workshop: Pat Akey

LAW & ECONOMICS WORKSHOP SERIES 

presents 

Pat Akey
University of Toronto
Rotman School of Management 

Policy Uncertainty, Political Capital, and Firm Risk-Taking 

Tuesday, January 12, 2016
4:10 – 5:45
Solarium (room FA2) - Falconer Hall
84 Queen's Park 

We link the cross-section of firms' sensitivities to economic policy uncertainty to their subsequent political activity and post-election risk-taking and performance.  We first show that firms with a high sensitivity to economic policy uncertainty donate more to candidates for elected office than less-sensitive firms.  Using a sample of close U.S. congressional elections, we then show that plausibly exogenous shocks to policy-sensitive firms' political capital bases produce large subsequent changes in these firms' investment, leverage, firm value, operating performance, CDS spreads, and option-implied volatility.  We do not find similar effects among less policy-sensitive firms, suggesting that many existing results in the political capital literature appear to be driven by policy-sensitive firms.  Our results highlight a new potential motivation behind firms' accumulation of political capital and represent the first attempt in the literature to shed light on the relationship between firms' policy sensitivities and their subsequent risk-taking and performance following political elections. 

Pat Akey is an Assistant Professor at the University of Toronto.  He completed his PhD in Finance in 2014 from the London Business School.  His research focuses on empirical corporate finance. He specializes on the interaction of law, politics and corporate behavior.  He has presented his research at several major conferences and published in The Review of Financial Studies.  He received the 2013 Best Paper Award at the University of Southern California Finance PhD Conference.  He was awarded a three-year research grant from the AXA Research fund and a Small Research Grant from the British Academy.

For more workshop information, please contact Nadia Gulezko at n.gulezko@utoronto.ca