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Lobbying expenditures and sin stock market performance

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  • Ghouma, Hatem H.
  • Hewitt, Carissa S.

Abstract

We examine the relationship between lobbying expenditures and the market performance for sin stocks. Considering the benefits of lobbying spending (such as receiving bailouts during economic crises, preferential tax rates, government contracts, and tariffs), we conjecture that sin stocks invest more in lobbying than non-sin stocks, and that this strategy leads to higher market performance. Using a sample of US listed sin stocks, we find strong evidence that firms in controversial industries spend more money in lobbying activities. Additionally, our findings suggest that lobbying sin stocks enjoy higher average (annualized) returns than non-lobbying sin stocks. Moreover, we find that these lobbying sin firms enjoy a higher return when compared to a benchmark of non-sin stocks.

Suggested Citation

  • Ghouma, Hatem H. & Hewitt, Carissa S., 2019. "Lobbying expenditures and sin stock market performance," Research in International Business and Finance, Elsevier, vol. 49(C), pages 176-190.
    • Handle: RePEc:eee:riibaf:v:49:y:2019:i:c:p:176-190
    DOI: 10.1016/j.ribaf.2019.03.006
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    Cited by:

    1. Monomita Nandy & Suman Lodh & Jin Wang & Jaskaran Kaur, 2021. "Does lobbying of firms complement executive networks in determining executive compensation?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4137-4162, July.

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