Political Clampdowns and Corporate Influence: Evidence from Deepwater Horizon

64 Pages Posted: 2 Sep 2016 Last revised: 3 Mar 2017

See all articles by Nimesh Patel

Nimesh Patel

University of Hawai'i at Manoa, Shidler College of Business

Date Written: March 1, 2017

Abstract

I investigate how political spending by corporations responds to regulatory concerns and if it is associated with improved firm value. Using the 2010 Deepwater Horizon disaster as an exogenous shock to the difficulty of obtaining offshore oil drilling permits, I show that offshore oil firms spent more money hiring lobbyists in order to influence the permitting process. In contrast, the evidence of a response through campaign contributions is weak. The lobbying spending was associated with both a higher probability of permit approval and faster time to approval. Permit approvals had a five-day cumulative abnormal return of 0.69% after the disaster. In particular, offshore firms hired more lobbyists with prior-employment connections to Congressmen or Federal agencies with oil industry oversight. My results show that corporate governance issues may be second-order in this setting and that lobbying may have a real impact on regulator decisions and a positive effect on firm value.

Keywords: Lobbying, Contributions, Regulation, Firm Value, Oil

JEL Classification: D72, G18, G38

Suggested Citation

Patel, Nimesh, Political Clampdowns and Corporate Influence: Evidence from Deepwater Horizon (March 1, 2017). Available at SSRN: https://ssrn.com/abstract=2833144 or http://dx.doi.org/10.2139/ssrn.2833144

Nimesh Patel (Contact Author)

University of Hawai'i at Manoa, Shidler College of Business ( email )

Honolulu, HI 96815
United States

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