Corporate Distress and Lobbying: Evidence from the Stimulus Act
51 Pages Posted: 27 Nov 2013 Last revised: 30 May 2015
Date Written: November 20, 2013
The literature on distressed firms has focused on these firms' investment, capital structure, and labor decisions. This paper investigates a novel aspect of firm behavior in distress: how financial health affects a firm's lobbying and, consequently, its relationship with the government. We exploit the shock to non-financial firms during the 2008 financial crisis and the availability of the stimulus package in the first quarter of 2009. We find that firms with weaker financial health, as measured by credit default swap spreads, lobbied more. We also show that the amount spent on lobbying was associated with a greater likelihood of receiving stimulus funds.
Keywords: Distress, Lobbying, Stimulus, Financial Crisis, Political Economy
JEL Classification: G28, G01, G33
Suggested Citation: Suggested Citation