Stock Ownership and Political Behavior: Evidence from Demutualizations

Abstract

A setting in which customer-owned mutual companies converted to publicly listed firms created a plausibly exogenous shock to salience of stock ownership. We use this shock to identify the effect of stock ownership on political behavior. Using IV regressions, difference-in-differences analyses, and matching methods, we find the shock changed the way people vote in the affected areas, with the demutualizations being followed by a 1.7–2.7 percentage points increase in rightof-center vote share. Analyses of demutualizations that did not involve public listing of shares suggest that explanations based on wealth, liquidity, and tax-related incentives do not drive the results.