Did Firms Profit from Soft Money?

14 Pages Posted: 7 Mar 2004  

Stephen Ansolabehere

Harvard University - Department of Government

James M. Snyder Jr.

Massachusetts Institute of Technology (MIT) - Department of Political Science & Department of Economics

Michiko Ueda

Syracuse University

Date Written: January 2004

Abstract

This paper uses event study methodology to measure whether firms that gave soft money to political parties received excessively high rates of returns from their contributions. We measure the excess returns of firms that gave large amounts of soft money and firms that gave no soft money, and changes in those excess returns around five key events in the approval of the Bi-Partisan Campaign Reform Act: the House of Representatives passes BCRA, the Senate passes BCRA, the President announces his intention to sign BCRA, the Supreme Court hears oral arguments, and the Court announced its decision to uphold the Act. These actions, especially the Court's decision, involved considerable uncertainty, and in some cases went against the conventional wisdom. Other studies have found that stock market prices do respond to surprising political events, such as the death of the powerful Senator Henry Jackson of Washington. We find that the five events surrounding the BCRA had no noticeable effect on the valuation of Fortune 500 firms that gave large amounts of soft money, relative to the firms that gave no soft money.

Keywords: campaign finance, interest groups, political economy

JEL Classification: D72

Suggested Citation

Ansolabehere, Stephen and Snyder, James M. and Ueda, Michiko, Did Firms Profit from Soft Money? (January 2004). MIT Economics Working Paper No. 04-11. Available at SSRN: https://ssrn.com/abstract=513062 or http://dx.doi.org/10.2139/ssrn.513062

Stephen Ansolabehere

Harvard University - Department of Government ( email )

1737 Cambridge Street
Cambridge, MA 02138
United States

James M. Snyder Jr. (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Political Science & Department of Economics ( email )

E53-457
Cambridge, MA 02139
United States
617-253-2669 (Phone)

Michiko Ueda

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

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