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Determinants and Effects of Corporate Lobbying

Authors

  • Matthew D. Hill,

  • G. Wayne Kelly,

  • G. Brandon Lockhart,

  • Robert A. Van Ness

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    • Matthew D. Hill is an Assistant Professor of Finance and the J. Ed Turner Chair of Real Estate at the University of Mississippi in University, MS. G. Wayne Kelly is an Associate Professor of Finance at the University of Southern Mississippi in Hattiesburg, MS. G. Brandon Lockhart is an Assistant Professor of Finance at Clemson University in Clemson, SC. Robert A. Van Ness is a Professor of Finance and Tom B. Scott Chair of Financial Institutions at the University of Mississippi in University, MS.


  • We thank Ken French for providing portfolio breakpoints and returns data via his website at Dartmouth University, Raghu Rau (editor), two anonymous referees, and Adam Yore (discussant, 2010 FMA Annual Meeting), for their comments. This research was conducted while Lockhart was an Assistant Professor of Finance at the University of Nebraska-Lincoln. All errors remain sole responsibility of the authors.

Abstract

We examine the determinants and value effects of corporate lobbying, controlling for corporate political action committee (PAC) campaign contributions. We find evidence that firms with greater potential payoffs from favorable policy and regulations lobby most actively, and that managers often utilize both lobbying and campaign contribution channels to influence the political climate affecting the firm. We also find that shareholders value the lobbying activities pursued by management on their behalf, particularly if the firm does not have a PAC that contributed to an election campaign. The results are robust to a number of tests designed to mitigate potential omitted-variable and self-selection bias.

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