Abstract

http://ssrn.com/abstract=945196
 
 

References (41)



 
 

Citations (58)



 


 



Political Connections and Preferential Access to Finance: The Role of Campaign Contributions


Stijn Claessens


International Monetary Fund (IMF); University of Amsterdam - Finance Group; Centre for Economic Policy Research (CEPR); Tinbergen Institute; European Corporate Governance Institute (ECGI)

Erik Feyen


World Bank - Financial and Private Sector Development Vice Presidency

Luc Laeven


International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)


Journal of Financial Economics, Forthcoming
ECGI - Finance Working Paper No. 166/2007
AFA 2008 New Orleans Meetings Paper

Abstract:     
Using novel indicators of political connections constructed from campaign contribution data, we show that Brazilian firms that provided contributions to (elected) federal deputies experienced higher stock returns around the 1998 and 2002 elections. This suggests contributions help shape policy on a firm-specific rather than ideological basis. Using a firm fixed effects framework to mitigate the risk that unobserved firm characteristics distort the results, we find that contributing firms substantially increased their bank leverage relative to a control group after each election, indicating that access to bank finance is an important channel through which political connections operate. We estimate the economic costs of these political connections over the two election cycles to be at least 0.2% of GDP per annum.

Number of Pages in PDF File: 61

Keywords: Campaign Contributions, Elections, Corruption, Preferential Lending

JEL Classification: D7, G1, G2, G3, P48

Accepted Paper Series


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Date posted: March 21, 2007  

Suggested Citation

Claessens, Stijn and Feyen, Erik and Laeven, Luc, Political Connections and Preferential Access to Finance: The Role of Campaign Contributions. Journal of Financial Economics, Forthcoming; ECGI - Finance Working Paper No. 166/2007; AFA 2008 New Orleans Meetings Paper. Available at SSRN: http://ssrn.com/abstract=945196

Contact Information

Stijn Claessens (Contact Author)
International Monetary Fund (IMF) ( email )
700 19th Street NW
Washington, DC 20431
United States
202-623-7641 (Phone)
202-5897641 (Fax)
University of Amsterdam - Finance Group ( email )
Roetersstraat 18
Amsterdam, 1018 WB
Netherlands
+31 20 525 6020 (Phone)
+31 20 525 5285 (Fax)
HOME PAGE: http://www.fee.uva.nl/fm/index.htm
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Tinbergen Institute ( email )
Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Erik H. B. Feyen
World Bank - Financial and Private Sector Development Vice Presidency ( email )
1818 H Street, N.W.
Washington, DC 20433
United States
+1 (202) 458 2038 (Phone)
+1 (202) 522 3184 (Fax)
Luc A. Laeven
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
202-6239020 (Phone)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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References:  41
Citations:  58

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