Valuing Changes in Political Networks: Evidence from Campaign Contributions to Close Congressional Elections

The Review of Financial Studies, Forthcoming

AFA 2013 San Diego Meetings Paper

49 Pages Posted: 29 Feb 2012 Last revised: 7 May 2015

Pat Akey

University of Toronto - Rotman School of Management

Multiple version iconThere are 3 versions of this paper

Date Written: December 1, 2014

Abstract

This paper investigates the value of firm political connections using a regression discontinuity design in a sample of close, off-cycle U.S. congressional elections. I compare firms donating to winning candidates and firms donating to losing candidates and find that post-election abnormal equity returns are 3% higher for firms donating to winning candidates. Connections to politicians serving on powerful congressional committees such as appropriations and taxation are especially valuable and impact contributing firms’ sales. Firms' campaign contributions are correlated with other political activities such as lobbying and hiring former government employees, suggesting that firms take coordinated actions to build political networks.

Keywords: Politics, Political Connections, Finance, Regression Discontinuity, Campaign Finance, Campaign Contribution, Political Economy

Suggested Citation

Akey, Pat, Valuing Changes in Political Networks: Evidence from Campaign Contributions to Close Congressional Elections (December 1, 2014). The Review of Financial Studies, Forthcoming; AFA 2013 San Diego Meetings Paper. Available at SSRN: https://ssrn.com/abstract=2012377 or http://dx.doi.org/10.2139/ssrn.2012377

Pat Akey (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada

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