Hail to the chief: The effect of political alignment with the presidency on corporate investment

We examine the effect of political alignment between the CEO and the US president on corporate investment. We find that when the CEO is from the same party as the President that the adverse effects of policy uncertainty on corporate investment are significantly reduced or eliminated. We arrive at this result after having controlled for investment opportunities, economic uncertainty, and political alignment with Congress. We also find that the political alignment between the CEO and the President has a greater effect on corporate investment for firms in industries with significant exposure to government spending. Our results go to confirm the effects of a country's politics and the occupier of the White House on CEOs’ business and economic outlooks. The results also point out that the effect of the behavioral traits of executives changes depending on the external environment.