Executives in Politics

53 Pages Posted: 26 Nov 2017 Last revised: 18 Jan 2018

Ilona Babenko

Arizona State University

Viktar Fedaseyeu

Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Song Zhang

Boston College - Department of Finance

Date Written: November 20, 2017

Abstract

Between 1980 and 2014, the share of politicians in federal office who held a corporate executive position prior to being elected increased from 13.5% to 21.2%, while the likelihood that an executive from the BoardEx database runs for federal elective office doubled over the same time period. Firms whose executives win federal elections experience significant positive stock returns around the dates of such elections and around the dates when Congress passes legislation introduced by their former executives. Relative to non-businessman politicians, we show that businessman politicians are not more effective at introducing or passing legislation but are significantly more likely to vote for legislation supported by pro-business interest groups and less likely to vote for legislation supported by labor unions or consumer advocacy groups. Businessman politicians have a 44.4% higher likelihood of winning elections, and executives with a good track record at their firms are more likely to run for political office. Overall, our results indicate that business representatives have increased their direct involvement in the legislative process in the United States and that this involvement may have generated substantial benefits for their firms. American voters appear to value business experience in political candidates, even though, once elected, such candidates are not more effective legislators than other politicians.

Keywords: businessman politicians, executives, corporate political connections

JEL Classification: G32, G38, D72, G30

Suggested Citation

Babenko, Ilona and Fedaseyeu, Viktar and Zhang, Song, Executives in Politics (November 20, 2017). Available at SSRN: https://ssrn.com/abstract=3075177 or http://dx.doi.org/10.2139/ssrn.3075177

Ilona Babenko

Arizona State University ( email )

Department of Finance
W.P. Carey School of Business
Tempe, AZ 85287
United States

Viktar Fedaseyeu (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy
+390258365283 (Phone)
+390258365283 (Fax)

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Song Zhang

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

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