Debtanu Lahiri

[1]  The Half-Life of Political Capital: An Examination of the Temporal Effects of Board Political Connections (Hawk, A;                         Lahiri, D; Pacheco de Almeida, G; all authors contributed equally):  Forthcoming in Strategic Management Journal

 

Does corporate political activity (CPA) help sustain performance? Prior literature does not address this question, only whether CPA increases profits – with  mixed results over short timescales. We theorize about how political capital affects the regression-to-the-mean of profits through firm and industry persistence mechanisms. Using data on over 6,000 firms from 14 democratic countries, we estimate time-varying, firm-specific performance persistence coefficients with random-coefficient models – and profit volatility measures. Triangulation over various identification methods suggests that the half-life of  political capital is shorter than expected, and also compared with other strategy interventions. Political connections are marginally effective at sustaining  performance and reducing volatility, delaying profit convergence by only 0.180 years – and with no effect beyond seven years. These modest CPA benefits  are further curbed by legislative constraints and political stability.

​

[2]  Incidence of Activist Actions on Politically Connected Companies: An Examination of a ‘Cost’ of Connection (Lahiri, D):                Working paper, preparing for submission

 

Despite both politicians and activists residing in the non-market sphere, research at their interface has been scarce. Our understanding of the tradeoffs involved in the firms’ relationship with these stakeholders is inadequate. This study partly addresses this void by arguing that the presence of board political connections increases the susceptibility of the firm to activist actions. Two mechanisms are suggested: Firstly, the firm’s association with a politician is likely to raise suspicion in the eyes of the activist because there is an inherent conflict in the ultimate objectives of social movement organizations (activists) vis-à-vis politicians, so far their relationship with firms is concerned. Secondly, politically connected firms are perceived to have higher sensitivity to social expectations. A novel dataset covering activist actions from the years 2010 to 2016 is used for empirical analysis, and the context is restricted to United States. As hypothesized, I find evidence that politically connected firms are more susceptible to activist actions, on an average. Furthermore, using a simple analytical model I demonstrate that this effect is strongly contingent  on the firms’ level of ESG adoption - such that, at higher levels of ESG adoption, the liability of connectedness dissipates (or diminishes considerably). This proposition also finds good support in the empirical analysis. Theoretically, by revealing a firm-specific determinant of activist actions, this study takes us a step closer towards defining the ‘corporate opportunity structure’ for activism, while also better characterizing the complex trade-offs involved in the firms’ relationship with various stakeholders.

[3]  Firms’ CSR Strategies in the face of Institutional de-prioritization of Sustainability Policies (Lahiri, D):

        Working paper

 

The study examines firms' response to sudden changes in the institutional environment, whereby the rules and regulations pertaining to the adoption of socially responsible practices is considerably muted. Using Trump's victory in the 2016 US Presidential Elections as an exogenous event that led to institutional de-prioritization’ of sustainability policies, this study reveals that US firms proactively improved their corporate social performance in response, in order to shield themselves against the potential consequences of the burden of de-legitimacy. This improvement was significantly lower for firms having no ideological predispositions since they are likely to be less constrained by socio-normative expectations. Theoretically, this study uses both the insurance-risk view and the corporate culture view to arrive at a nuanced understanding of firms' motivation for adopting CSR practices.