Judicial Philosophy and Corporate Investment in the United States

42 Pages Posted: 14 Dec 2020

Date Written: November 24, 2020

Abstract

As the final arbiter of disputes, courts have the potential to significantly impact the fortunes of firms. Using the relationship between corporate investment and federal court composition, I find that firms have strong preferences for the composition of the judiciary along two dimensions. First, firms invest more in jurisdictions with more Republican-appointed judges. Second, firm invest less as judicial uncertainty increases (i.e. the ratio between Republican-appointed and Democratic-appointed judges approaches an even split). To address potential endogenity, I look at changes in corporate investment following the death of sitting federal appellate court judges. I find that corporations significantly reduce their investment when a Republican-appointed judge dies and is replaced by a Democratic-appointed judge. The reverse, however, does not predict a change investment.

Keywords: Corporate Investment, Finance and Law, Political Uncertainty, Federal Courts, Empirical Corporate Finance

JEL Classification: D23, G31, G38, H11, K40

Suggested Citation

Schwartz, Andrew, Judicial Philosophy and Corporate Investment in the United States (November 24, 2020). Available at SSRN: https://ssrn.com/abstract=3736928 or http://dx.doi.org/10.2139/ssrn.3736928

Andrew Schwartz (Contact Author)

Seton Hall University ( email )

400 S Orange Avenue
South Orange, NJ 07079
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
28
Abstract Views
183
PlumX Metrics