Political Ties across Country Borders

57 Pages Posted: 15 Oct 2019 Last revised: 8 Apr 2020

See all articles by Meghana Ayyagari

Meghana Ayyagari

George Washington University - School of Business

April M. Knill

Florida State University College of Business; Florida State University - College of Law

Kelsey Syvrud

Florida State University; University of South Florida - Department of Finance

Date Written: September 1, 2019

Abstract

This paper investigates the value to foreign firms of contributing to US political campaigns. Using a comprehensive database of US campaign contributions by employees of US subsidiaries of foreign firms, we find that foreign firms contributing to US political campaigns have higher profits than a country-industry-size matched sample of foreign firms that do not contribute. In particular, foreign firms facing greater information asymmetry have greater benefits from contributions. Exploiting the Bipartisan Campaign Reform Act (BCRA) as an exogenous shock to campaign contributions, we find that foreign contributing firms not only receive more government contracts than non-contributing foreign and domestic firms, but also benefit disproportionately more than domestic contributing firms. Our results highlight the limited effectiveness of campaign contribution laws and the cost to US firms of foreign political contributions.

Keywords: political connections, international, cross-border, firm value, procurement contracts, Bipartisan Campaign Reform Act

JEL Classification: G3, F30, G38, G30, H57

Suggested Citation

Ayyagari, Meghana and Knill, April M. and Syvrud, Kelsey, Political Ties across Country Borders (September 1, 2019). Available at SSRN: https://ssrn.com/abstract=3461819 or http://dx.doi.org/10.2139/ssrn.3461819

Meghana Ayyagari

George Washington University - School of Business ( email )

Washington, DC 20052
United States

April M. Knill (Contact Author)

Florida State University College of Business ( email )

Tallahassee, FL 32306-1042
United States
(850) 644-2047 (Phone)

Florida State University - College of Law ( email )

425 W. Jefferson Street
Tallahassee, FL 32306
United States

Kelsey Syvrud

Florida State University ( email )

Tallahasse, FL 32306
United States

University of South Florida - Department of Finance ( email )

Tampa, FL 33620-5500
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
13
Abstract Views
166
PlumX Metrics