Pay to Play in Investment Management

47 Pages Posted: 11 Sep 2019 Last revised: 14 Aug 2020

See all articles by William Beggs

William Beggs

University of San Diego School of Business

Thuong Harvison

University of Arizona, Eller College of Management, Department of Finance

Date Written: August 14, 2020

Abstract

This study investigates the pervasiveness of pay to play activities in the management of U.S. public pension assets. Our tests show the presence of government clients for an investment advisory firm is strongly associated with past owner and officer contributions to the campaigns of influential state politicians. We use the adoption of SEC pay to play rules in 2011 as a quasi-experiment. Prior to implementation, government clients make up nearly twice the number of clients in an advisor’s client base for donor advisors relative to non-donor advisors. We observe a precipitous decline in donations made by advisors catering to government clients post-rule enactment.

Keywords: Investment management, public pension plans, political contributions

JEL Classification: G11, G23

Suggested Citation

Beggs, William and Harvison, Thuong, Pay to Play in Investment Management (August 14, 2020). Available at SSRN: https://ssrn.com/abstract=3446357 or http://dx.doi.org/10.2139/ssrn.3446357

William Beggs (Contact Author)

University of San Diego School of Business ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

Thuong Harvison

University of Arizona, Eller College of Management, Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tuscon, AZ 85721
United States

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