Incorporated in Westminster: Channels and Returns to Political Connection in the United Kingdom

53 Pages Posted: 29 Nov 2018 Last revised: 29 Oct 2020

See all articles by Colin P. Green

Colin P. Green

Department of Economics

Swarnodeep HomRoy

University of Groningen

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2018

Abstract

In 2002, an amendment to UK parliamentary regulations removed restrictions on the participation of members of parliament (MPs) in parliamentary proceedings related to their corporate interests. Using this amendment as a quasi-natural experiment, we demonstrate higher equity returns for FTSE 350 firms connected to an MP due to the increase in the value of political access, net of the expertise of the politician. Post-amendment, MPs with corporate connections are more likely to be members of parliamentary select and joint committees and attend more committee meetings. Firms are more likely to appoint MPs and reduce political donations. The benefits of higher political access are greater for firms with family ownership and lower accounting transparency.

Keywords: Political Connections, Board of Directors, Firm Value

JEL Classification: G14, D72, G18, G30

Suggested Citation

Green, Colin P. and HomRoy, Swarnodeep, Incorporated in Westminster: Channels and Returns to Political Connection in the United Kingdom (September 1, 2018). Available at SSRN: https://ssrn.com/abstract=3279041 or http://dx.doi.org/10.2139/ssrn.3279041

Colin P. Green

Department of Economics ( email )

Høgskoleringen
Trondheim NO-7491, 7491
Norway

Swarnodeep HomRoy (Contact Author)

University of Groningen ( email )

Nettlebosje 2
Department of Economics, Econometrics and Finance
Groningen, Groningen 9747 AE
Netherlands

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