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

61 Pages Posted: 5 Oct 2013 Last revised: 15 Nov 2013

See all articles by Pat Akey

Pat Akey

University of Toronto - Rotman School of Management

Multiple version iconThere are 3 versions of this paper

Date Written: November 2013

Abstract

This paper investigates the value of firm political connections to US congressional candidates using a regression discontinuity design. In a sample of close special elections occurring at times unrelated to firm-specific economic events or broader political events, I compare the abnormal returns of firms that contributed to winning candidates to those of firms that contributed to losing candidates. I find the wedge between these firms to be 1.7% to 6.8% of firm equity value. To assess which areas of policy matter most, I test which congressional committee assignment seats are the most valuable. In particular, the loss of a connection to the Senate Appropriations committee leads to a loss of $1.9 billion in sales in the following year. Finally, I examine additional actions that firms take to develop political networks — directly hiring former government employees and engaging professional lobbyists — and find that these actions complement their contribution strategies.

Keywords: Politics and Finance, Political Connections

Suggested Citation

Akey, Pat, Valuing Changes in Political Networks: Evidence from Campaign Contributions to Close Congressional Elections (November 2013). Available at SSRN: https://ssrn.com/abstract=2336131 or http://dx.doi.org/10.2139/ssrn.2336131

Pat Akey (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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