Ideological Customer Capital: Measurement and Asset Pricing Implications

Ideological customer capital—the customer base loyal to a firm’s brand due to shared ideology—acts as a critical intangible asset that directly drives the firm’s cash flows. We use federal procurement to measure a firm’s ideological customer capital attributed to the government and study its asset pricing implications. The U.S. government is a major customer and has the discretion to consider ideological factors in procurement. Leveraging detailed contract-level data, we develop and structurally estimate a procurement auction model and find that a firm’s procurement revenues are significantly driven by its ideological alignment with the government, specifically regarding its political leaning, sustainability, gender composition, and exposure to China. Constructing a model-implied measure of firm-level ideological customer capital, we show that firms with higher levels of this capital are significantly less exposed to aggregate cash flow risk.