Pay to Play in Investment Management
47 Pages Posted: 11 Sep 2019 Last revised: 12 Oct 2020
Date Written: October 10, 2020
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: Suggested Citation