Growing up Under Mao and Deng: On Politician Ideology and Corporate Policies

We provide firm-level evidence on how politicians’ ideologies shape economic outcomes, using a unique setting of ideological discontinuity in China, transitioning from Maoism to Dengism around 1978. We find that ideological exposure during a politician’s early adulthood has a lasting impact on contemporary firm policies in their city. Firms governed by “Maoist mayors” show greater stakeholder spending, lower pay inequality, and less internationalization compared with those governed by “Dengist mayors.” Further evidence suggests that politicians’ ideologies influence corporate behaviors through nonpolicy channels, and these results cannot be fully explained by selection bias, endogenous matching, or the age of the mayor. This paper was accepted by Will Cong, finance. Funding: This work was supported by the Association of Southeast Asian Nations Business Research Initiative [Grant G17C20406 from SMU and CKGSB] from the Singapore Management University and the China Europe International Business School. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.01745 .