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http://ssrn.com/abstract=1426219
 
 

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The Politics of Government Investment


Ran Duchin


University of Washington - Michael G. Foster School of Business

Denis Sosyura


University of Michigan, Stephen M. Ross School of Business

November 2011

Journal of Financial Economics (JFE), Vol. 106, No. 1, 2012

Abstract:     
This paper investigates the relation between corporate political connections and government investment. We study various forms of political influence, ranging from passive connections between firms and politicians, such as those based on politicians’ voting districts, to active forms, such as lobbying, campaign contributions, and employment of connected directors. Using hand-collected data on firm applications for TARP funds, we find that politically connected firms are more likely to be funded, controlling for other characteristics. Yet investments in politically connected firms underperform those in unconnected firms. Overall, we show that connections between firms and regulators are associated with distortions in investment efficiency.

Number of Pages in PDF File: 54

Keywords: Troubled Asset Relief Program, TARP, political connections, lobbying, contributions

JEL Classification: D72, G01, G21, G28

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Date posted: July 1, 2009 ; Last revised: September 15, 2013

Suggested Citation

Duchin, Ran and Sosyura, Denis, The Politics of Government Investment (November 2011). Journal of Financial Economics (JFE), Vol. 106, No. 1, 2012. Available at SSRN: http://ssrn.com/abstract=1426219 or http://dx.doi.org/10.2139/ssrn.1426219

Contact Information

Ran Duchin
University of Washington - Michael G. Foster School of Business ( email )
Box 353200
Seattle, WA 98195-3200
United States
Denis Sosyura (Contact Author)
University of Michigan, Stephen M. Ross School of Business ( email )
701 Tappan Street
Ann Arbor, MI MI 48109
United States
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