Lobbying in Finance Industry: Evidence from US Banking System
Networks Financial Institute Working Paper Series 2017-WP-03
41 Pages Posted: 1 Nov 2017
There are 4 versions of this paper
Lobbying in Finance Industry: Evidence from US Banking System
Lobbying in Finance Industry: Evidence from US Banking System
Lobbying in Finance Industry: Evidence from US Banking System
Lobbying in Finance Industry: Evidence From US Banking System
Date Written: December 31, 2016
Abstract
We examine the relationship between corporate lobbying, shareholder-based litigation outcomes, and firm value for financial firms. First, we show that political lobbying lowers the litigation likelihood for financial institutions. Secondly, lobbying firms experience a higher likelihood of having litigation dismissed, and the average settlement amount is significantly lower for lobbying institutions. In addition, shortly after a litigation announcement, lobbying firms experience significantly higher cumulative abnormal returns (CARs), compared to non-lobbying firms. Finally, we show that lobbying firms have higher long-run buy-and-hold abnormal stock returns (BHARs) following lobbying activities. Our results link financial institution lobbying activity with improved legal outcomes and increases in firm value, implying that lobbying may protect financial institutions from reduced firm value through the building of political capital and reducing litigation costs.
Keywords: corporate lobbying, corporate fraud, corporate governance
JEL Classification: G30, G32, G38, K41
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
