The Corporate Value of (Corrupt) Lobbying
62 Pages Posted: 31 May 2014 Last revised: 20 Nov 2014
Date Written: September 20, 2014
Using an event study, we examine whether the stock market considers corporate lobbying to be a value-enhancing activity. On January 3, 2006, lobbyist Jack Abramoff pleaded guilty to bribing politicians, which generated intense scrutiny of lobbyists, limiting their political influence. Using this event as a negative exogenous shock to the ability of firms to lobby, we show that a firm that spends $100,000 more cumulatively on lobbying in the three years prior to 2006, experiences a loss of about $1.2 million in value around the guilty plea. We also find suggestive evidence that part of the value from lobbying may arise from potentially unethical practices.
Keywords: Lobbying, shareholder value, corporate social responsibility, corruption, political connections
JEL Classification: G14, G18, G38, D72
Suggested Citation: Suggested Citation