Abstract

Freedom is a universal value that fundamentally shapes social and economic life. This study examines how a country’s political freedom (PF) and economic freedom (EF) influence corporations’ commitment to maintaining a loyal shareholder base (CSL). Using a sample of 45 countries from 2004 to 2015, our first-differencing regressions reveal that both PF and EF are positively associated with CSL. More importantly, the effect of PF is substantially stronger than that of EF. Furthermore, the impact of EF is contingent upon the level of PF, but not vice versa. Finally, our analysis indicates that improvements in PF are associated with greater increases in CSL for state-owned enterprises, suggesting that limited political freedom disproportionately undermines shareholder loyalty in these firms. These findings are robust to a range of tests for endogeneity concerns.