The Determinants of Effective Corporate Lobbying

28 Pages Posted: 20 Feb 2014 Last revised: 12 Apr 2016

See all articles by Richard Borghesi

Richard Borghesi

University of South Florida-Sarasota

Kiyoung Chang

University of South Florida Sarasota-Manatee - College of Business

Date Written: March 11, 2014


In this paper we study whether capital markets view lobbying activities to be value enhancing by examining the effects of lobbying on excess returns and stock return volatility. We undertake our analysis cautious that there are significant differences between the characteristics of lobbying and non-lobbying firms. Specifically, firm size, free cash flows, and R&D intensity are critically important factors that may drive results of our and other lobbying research. We show that once properly accounting for the effects of firm size, a managerial agency problem in lobbying is apparent. Initially we find that shareholders experience either no discernible or else negative excess returns in response to firm lobbing efforts. Results are even stronger when corrections are made for endogeneity issues. Further, evidence presented suggests that lobbying firms have higher volatility of stock returns, and we show that volatility is greater for firms that lobby more intensely. However, for R&D-intensive firms, and for those firms with low agency problems, lobbying does contribute to the long-term benefit of shareholders. Overall, results suggest that lobbying leads to positive excess returns when agency problems are low and R&D is high, and leads to negative excess returns otherwise.

Keywords: Lobbying, Excess Returns, Volatility, Agency; Research and Development

JEL Classification: G34, D72, D73

Suggested Citation

Borghesi, Richard and Chang, Kiyoung, The Determinants of Effective Corporate Lobbying (March 11, 2014). Borghesi, Richard and Kiyoung Chang, 2015. The Determinants of Effective Corporate Lobbying, Journal of Economics and Finance 39(3), 606-624.. Available at SSRN: or

Richard Borghesi (Contact Author)

University of South Florida-Sarasota ( email )

8350 N. Tamiami Trail
Sarasota, FL 34243-2049
United States
941-359-4524 (Phone)
941-359-4367 (Fax)


Kiyoung Chang

University of South Florida Sarasota-Manatee - College of Business ( email )

8350 N. Tamiami Trail, SMC-C263
Sarasota, FL 34243-2025
United States
9413594359 (Phone)
9413594367 (Fax)

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