Abstract

http://ssrn.com/abstract=1495143
 
 

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Lobby or Contribute? - The Impact of Corporate Governance on Firms' Political Strategies


Bing Guo


Universitat Autonoma de Barcelona

October 27, 2009


Abstract:     
This paper theoretically and empirically studies the impact of corporate governance level on firms' choice in two political strategies: lobbying and making political contributions. The theoretical model implies that managers, who care more about personal interests in short run, prefer making political contributions; while shareholders, caring more about firms' long-term success, are more willing to do informational lobbying. At equilibrium, the efficiency of the decision making process is increasing in the governance level. Using lobbying and contribution data from U.S. in the 1998-2006 period, I confirm the main theoretical predictions: (1) Firms only doing lobbying outperform those only making contributions in the corporate governance level. (2) Firms with higher shareholder power do more lobbying. (3) Fewer firms with high shareholder power would make contributions than those with high manager power. However, once they do, they contribute more than the latter. Therefore, if corporate governance level is improved, fewer contributions will be made by firms.

Number of Pages in PDF File: 45

Keywords: Corporate Governance Level, Informational Lobbying, Political Contributions

JEL Classification: G32, G34, D72

working papers series


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Date posted: October 28, 2009 ; Last revised: December 30, 2009

Suggested Citation

Guo, Bing, Lobby or Contribute? - The Impact of Corporate Governance on Firms' Political Strategies (October 27, 2009). Available at SSRN: http://ssrn.com/abstract=1495143 or http://dx.doi.org/10.2139/ssrn.1495143

Contact Information

Bing Guo (Contact Author)
Universitat Autonoma de Barcelona ( email )
Carrer de Sant Antoni Maria Claret, 282
Barcelona, Barcelona 08041
Spain
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