Political Activism and Market Power

66 Pages Posted: 15 May 2020 Last revised: 21 May 2020

See all articles by Elia Ferracuti

Elia Ferracuti

Duke University - Fuqua School of Business

Roni Michaely

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute

Laura Wellman

Pennsylvania State University

Date Written: April 25, 2020

Abstract

Using novel data on firms’ government relations staff, and two distinct empirical settings, we show that political activism enables firms to grow their market power. The documented increases in profit margins and market share persist for up to two years, and are concentrated among large politically active firms. We also utilize firms’ mandatory lobbying disclosures to identify a broad set of legislative actions lobbied for by sample firms, and analyze their strategic actions around those events. Taken together, our results show that politically active firms gain a competitive advantage through strategically timed investments when policy uncertainty is high.

Keywords: Market Power, Political Activism, Policy Uncertainty, Competition, Profitability, Profit Margins, Market Share, Capital Investment

JEL Classification: D72, G31, G38, P16

Suggested Citation

Ferracuti, Elia and Michaely, Roni and Wellman, Laura, Political Activism and Market Power (April 25, 2020). Available at SSRN: https://ssrn.com/abstract=3585372 or http://dx.doi.org/10.2139/ssrn.3585372

Elia Ferracuti

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-1974 (Phone)

Roni Michaely (Contact Author)

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Laura Wellman

Pennsylvania State University ( email )

378 Business Building
University Park, PA 16802
United States
6026225683 (Phone)

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