The Lion’s Share: Evidence from Federal Contracts on the Value of Political Connections

42 Pages Posted: 22 Nov 2022

See all articles by Senay Agca

Senay Agca

George Washington University - School of Business, Department of Finance

Deniz Igan

Bank for International Settlements (BIS)

Date Written: November 9, 2022

Abstract

We examine the role of political connections in receiving federal funds during an unexpected surge in government defense spending. While the data do not allow identification of a causal link, the analysis uncovers that politically connected firms were awarded larger amounts in federal contracts when available funds increased. Specifically, firms that lobbied received around one third more in the amount of defense contracts compared to those that did not lobby. Similar evidence holds for campaign contributions and board connections. The increase in the amount of contracts obtained is observed primarily for firms that had limited ability to efficiently support Pentagon efforts, and when contracts received less scrutiny. Between political connections and merit-based channels in government contracting, the results mainly, but not exclusively, support the first channel.

Keywords: Lobbying, Campaign contributions, Board connections, Political connections, Corporate revenue, Government spending, Procurement, Federal contracts

JEL Classification: D72, G38, H57, H61, P16

Suggested Citation

Agca, Senay and Igan, Deniz, The Lion’s Share: Evidence from Federal Contracts on the Value of Political Connections (November 9, 2022). Available at SSRN: https://ssrn.com/abstract=4280166 or http://dx.doi.org/10.2139/ssrn.4280166

Senay Agca (Contact Author)

George Washington University - School of Business, Department of Finance ( email )

2201 G Street
Funger Hall 505
Washington, DC 20052
United States
202-994-9209 (Phone)
202-994-5014 (Fax)

HOME PAGE: http://sites.google.com/site/senayagcaweb/

Deniz Igan

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, 4002
Switzerland

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