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The Value of the Revolving Door: Political Appointees and the Stock Market

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  • Simon Luechinger
  • Christoph Moser

Abstract

We analyze stock market reactions to announcements of political appointments from the private sector and corporate appointments of former government officials. Using unique data on corporate affiliations and announcements of all Senate-confirmed U.S. Defense Department appointees of six administrations, we find positive abnormal returns for political appointments. These estimates are not driven by important observations, volatile stocks or industry-wide developments. Placebo events yield no effects. Effects are larger for top government positions and less anticipated announcements. We also find positive abnormal returns for corporate appointments. Our results suggest that conflicts of interest matter also in a country with strong institutions.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3921.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3921

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Related research

Keywords: political appointees; revolving door; conflict of interest; event study; stock market;

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References

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  1. Bunkanwanicha, Pramuan & Wiwattanakantang, Yupana, 2008. "Big Business Owners in Politics," CEI Working Paper Series 2008-17, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  2. Jayachandran, Seema, 2006. "The Jeffords Effect," Journal of Law and Economics, University of Chicago Press, vol. 49(2), pages 397-425, October.
  3. Arindrajit Dube & Ethan Kaplan & Suresh Naidu, 2011. "Coups, Corporations, and Classified Information," NBER Working Papers 16952, National Bureau of Economic Research, Inc.
  4. Bechtel, Michael M. & Schneider, Gerald, 2010. "Eliciting Substance from ‘Hot Air’: Financial Market Responses to EU Summit Decisions on European Defense," International Organization, Cambridge University Press, vol. 64(02), pages 199-223, April.
  5. MARA FACCIO & RONALD W. MASULIS & JOHN J. McCONNELL, 2006. "Political Connections and Corporate Bailouts," Journal of Finance, American Finance Association, vol. 61(6), pages 2597-2635, December.
  6. Marianne Bertrand & Matilde Bombardini & Francesco Trebbi, 2011. "Is It Whom You Know or What You Know? An Empirical Assessment of the Lobbying Process," NBER Working Papers 16765, National Bureau of Economic Research, Inc.
  7. Michael J. Cooper & Huseyin Gulen & Alexei V. Ovtchinnikov, 2010. "Corporate Political Contributions and Stock Returns," Journal of Finance, American Finance Association, vol. 65(2), pages 687-724, 04.
  8. Jordi Blanes i Vidal & Mirko Draca & Christian Fons-Rosen, 2010. "Revolving Door Lobbyists," CEP Discussion Papers dp0993, Centre for Economic Performance, LSE.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Revolving Doors Matter
    by James Kwak in The Baseline Scenario on 2012-10-23 02:13:05

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