Political Lobbying, Insider Trading, and CEO Compensation
Posted: 31 May 2019
Date Written: June 10, 2018
In this study, we determine why CEOs from lobbying firms receive higher pay compared to their non-lobbying peers. We investigate whether insider trading can explain high CEO pay. Using hand-collected firm-level lobbying data, we examine whether CEOs from lobbying firms engage in insider trading after sponsored bills are introduced and passed in the U.S. Congress. Our results show that the number of CEO stock transactions from lobbying firms correlates with bills being passed, which yields higher compensation packages. In addition, we find that lobbying benefits firm performance. Lobbying firms receive more government contracts, which increases firm value. Overall, lobbying benefits both CEOs and shareholders.
Keywords: Insider trading, Political lobbying, Firm performance
JEL Classification: G14, G30, G31, M12
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