Executives in Politics

Abstract

We study the involvement of corporate executives in U.S. politics over the last forty years. First, we document that the share of business politicians in federal elected office increased from 13.3% in 1980 to 22.6% in 2018, with most of the increase occurring over the last two decades. Second, we find that business politicians enjoy an early fundraising advantage over their opponents, both because they are more likely to self-fund their campaigns and because they receive more campaign contributions from their firms. Third, the election of business politicians benefits their industries and firms, which experience positive abnormal stock returns when their executives win political office. We also show that business politicians, once elected, vote for policies that shift the balance of power toward corporate interests. Using close elections for identification, we show that this policy shift cannot be attributed solely to the changes in the underlying preferences of the electorate. Overall, our results indicate that corporate executives have become more involved in U.S. politics and that this involvement has benefited business interests and affected aggregate legislative outcomes.

Keywords: business politicians, executives, campaign finance, corporate political connections

JEL Classification: G32, G38, D72, G30