Returns to Seeking Political Influence: Early Evidence from the COVID-19 Stimulus

Abstract

Measuring various ways of seeking political influence and potential monetary return from such an endeavor is difficult. To address that challenge, we collect data on four mechanisms of acquiring political influence: lobbying spending, PAC contributions, lobbying through trade associations, and an invitation to testify in Congress for 10 years spanning 2010-2020. We investigate associations between these four mechanisms benefits from the largest stimulus package passed by Congress to address COVID-19. The odds of receiving governmental assistance for publicly listed firms that seek political influence are 94.2% for those who lobby directly, 170.7% higher for those who give PAC contributions, and 77.3% higher for those that lobby through a trade association. Beneficiary organizations of all stripes received from $3.26 (for lobbying) to $51.28 (for PAC contributions) of additional COVID-19 stimulus for each dollar they spent on political influence. Government organizations, which are usually not studied in the literature, earned larger returns to their political influence spending relative to public companies. Generally, a dollar spent on political influence by 2,758 unique firms on COMPUSTAT is associated with $20.67 of higher annual earnings in the future. This return is orders of magnitude larger than the payoff to R&D or advertising. Our work highlights how lucrative political influence can be for firm value.

Keywords: COVID-19, CARES Act, corporate beneficiaries, payoff, political influence, government beneficiaries

JEL Classification: G18, H25, H44, H51