Political Lobbying, Insider Trading, and CEO Compensation

Posted: 31 May 2019

See all articles by Jennifer Brodmann

Jennifer Brodmann

California State University, Dominguez Hills

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

Date Written: June 10, 2018

Abstract

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

Suggested Citation

Brodmann, Jennifer and Unsal, Omer and Hassan, M. Kabir, Political Lobbying, Insider Trading, and CEO Compensation (June 10, 2018). International Review of Economics & Finance, Vol. 59, No. 548-565, 2019. Available at SSRN: https://ssrn.com/abstract=3384801

Jennifer Brodmann (Contact Author)

California State University, Dominguez Hills ( email )

1000 E. Victoria Street, Carson, CA
Carson, CA 90747
United States

Omer Unsal

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

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