The Hong Kong University of Science and Technology, Hong Kong
How do politically active firms that benefit from established institutions navigate the transition to political transparency and public scrutiny, and who stands to benefit from such a shift? We address this question by examining how the exposure of corporate political donations affects subsequent government contracts. Our findings suggest that donor firms experience a decline in government contracts following the exposure of their political donations. However, business groups leverage their structural advantages to redistribute these contracts to other affiliates within the group. This within-group redistribution is more likely to occur from donor affiliates that exert significant control over others to affiliates under such control and becomes especially pronounced when apex firms hold multiple board positions in the affected affiliates. We also identify across-market redistribution and negative externalities on standalone firms. Politically active standalone firms in sectors dominated by politically active business groups face even greater declines in government contracts after their donations are exposed compared to other standalone firms. We use the G0V Movement, which abruptly exposed corporate political donations in Taiwan as the empirical context. We contribute to the literature on corporate political activities, institutional transitions, business groups, and social movements.
