Pay to Play in Investment Management

52 Pages Posted: 11 Sep 2019 Last revised: 15 Jan 2021

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: January 15, 2021

Abstract

This study investigates the pervasiveness of pay to play in U.S. public pensions. We document a strong positive and statistically significant relation between the presence of government clients for an investment advisory firm and past owner and officer donations to influential state politicians. We use the adoption of SEC Rule 206(4)-5 which prohibited pay to play activities as a quasi-experiment. Prior to rule adoption, advisors that donate have nearly twice the percentage of public pensions in their client base relative to non-donor advisors. We observe a precipitous decline in donations made by advisors catering to public pension plans post-rule enactment.

Keywords: Investment management, public pension plans, political contributions

JEL Classification: G11, G23, G28, H75

Suggested Citation

Beggs, William and Harvison, Thuong, Pay to Play in Investment Management (January 15, 2021). 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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