Corporate Lobbying and CEO Pay

46 Pages Posted: 16 Oct 2013 Last revised: 19 Nov 2013

See all articles by Hollis Ashbaugh Skaife

Hollis Ashbaugh Skaife

Graduate School of Management, UC-Davis

David Veenman

University of Amsterdam - Amsterdam Business School (ABS)

Timothy Werner

University of Texas at Austin - Red McCombs School of Business

Date Written: October 15, 2013

Abstract

This study examines the agency costs of corporate lobbying by exploring the relation between lobbying and excess CEO compensation. We show that CEOs of firms engaged in lobbying earn significantly greater compensation levels compared to CEOs in non-lobbying firms, after controlling for standard economic determinants of pay. The relation between lobbying and CEO pay increases with the intensity of firms’ lobbying. Although lobbying is positively associated future sales growth, we find no evidence suggesting it culminates in shareholder wealth creation. Additional tests reveal that for a subset of firms with available data, governance attributes mediate the relation between lobbying and firms’ decision to lobby. Lastly, a difference-in-difference, propensity-score matched analysis suggests significant increases in CEO pay levels around firms’ initial lobbying engagements. Overall, we conclude that corporate lobbying introduces agency costs borne by shareholders.

Keywords: Lobbying, CEO Compensation, Agency Costs, Corporate Governance

JEL Classification: G30, G32, G34

Suggested Citation

Skaife, Hollis Ashbaugh and Veenman, David and Werner, Timothy, Corporate Lobbying and CEO Pay (October 15, 2013). Available at SSRN: https://ssrn.com/abstract=2340501 or http://dx.doi.org/10.2139/ssrn.2340501

Hollis Ashbaugh Skaife

Graduate School of Management, UC-Davis ( email )

Graduate School of Management
1 Shields Ave
Davis, CA 95616
United States

David Veenman (Contact Author)

University of Amsterdam - Amsterdam Business School (ABS) ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

Timothy Werner

University of Texas at Austin - Red McCombs School of Business ( email )

United States
5122326844 (Phone)

HOME PAGE: http://timothywerner.com

Register to save articles to
your library

Register

Paper statistics

Downloads
437
rank
64,213
Abstract Views
2,573
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information