Determinants and Effects of Corporate Lobbying

Abstract:     
This study examines the determinants and shareholder wealth effects of corporate lobbying. Descriptive and multivariate statistics indicate a substantial temporal increase in lobbying expenditures and the proportion of firms lobbying. We find that lobbying behavior is related to firm size, investment opportunities, cash flow, state and capital city incorporation, and industry and time effects. After controlling for factors known to influence firm value, results suggest lobbying firms significantly outperform non-lobbying firms. Further, excess returns are directly associated with the number of years that firms lobby, prior period investments in lobbying, and lobbying expenditures in excess of industry norms. Results are robust to self-selection bias.

Number of Pages in PDF File: 47

Keywords: Corporate Lobbying, Political Connections, Market Value

working papers series