Lobbying in Finance Industry: Evidence From US Banking System

NFI Working Paper, December 2016

41 Pages Posted: 27 Oct 2018

See all articles by Omer Unsal

Omer Unsal

Merrimack College - Girard School of Business - Department of Accounting and Finance

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

William Hippler

University of New Orleans - Department of Economics and Finance

Multiple version iconThere are 4 versions of this paper

Date Written: December 2016

Abstract

We examine corporate lobbying as a means of influencing federal securities class action litigation outcomes and increasing firm value for financial firms. First, we show that political lobbying lowers litigation likelihood for financial institutions. Secondly, lobbying firms experience a higher likelihood of case dismissal, and the average settlement amount is significantly lower for lobbying institutions. In addition, lobbying firms experience significantly higher cumulative abnormal returns (CARs) surrounding litigation announcements, 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 improved litigation outcomes.

Keywords: Corporate Lobbying, Corporate Fraud, Corporate Governance, Financial Institutions

JEL Classification: G30, G32, G38, K41

Suggested Citation

Unsal, Omer and Hassan, M. Kabir and Hippler, William, Lobbying in Finance Industry: Evidence From US Banking System (December 2016). NFI Working Paper, December 2016 , Available at SSRN: https://ssrn.com/abstract=3062727

Omer Unsal (Contact Author)

Merrimack College - Girard School of Business - Department of Accounting and Finance ( email )

315 Turnpike St
North Andover, MA 01845
United States

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

William Hippler

University of New Orleans - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

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