IDEAS home Printed from https://ideas.repec.org/p/zbw/cbscwp/291.html
   My bibliography  Save this paper

The Value of Political Geography: Evidence from the Redistricting of Firms

Author

Listed:
  • Artés, Joaquín
  • Richter, Brian Kelleher
  • Timmons, Jeffrey F.

Abstract

We demonstrate that political geography has value to firms. We do so by exploiting shocks to political maps that occur around redistricting cycles in the United States. These keep some firms in Congressional districts that are largely unchanged at one extreme and reassign other firms to entirely new sets of constituents at the other extreme. Our main finding is that firms suffer from being reassigned into districts that are competitive across parties relative to safer districts. The effects are not trivial in magnitude. Moreover, they do not depend on whether firm retain the same politician or actively make campaign contributions.

Suggested Citation

  • Artés, Joaquín & Richter, Brian Kelleher & Timmons, Jeffrey F., 2019. "The Value of Political Geography: Evidence from the Redistricting of Firms," Working Papers 291, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    • Handle: RePEc:zbw:cbscwp:291
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/262693/1/wp291.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Thomas Ferguson & Hans-Joachim Voth, 2008. "Betting on Hitler—The Value of Political Connections in Nazi Germany," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(1), pages 101-137.
    2. Marianne Bertrand & Matilde Bombardini & Raymond Fisman & Francesco Trebbi, 2020. "Tax-Exempt Lobbying: Corporate Philanthropy as a Tool for Political Influence," American Economic Review, American Economic Association, vol. 110(7), pages 2065-2102, July.
    3. Adam Fremeth & Brian Kelleher Richter & Brandon Schaufele, 2018. "Spillovers from regulating corporate campaign contributions," Journal of Regulatory Economics, Springer, vol. 54(3), pages 244-265, December.
    4. Knight*, Brian, 2007. "Are policy platforms capitalized into equity prices? Evidence from the Bush/Gore 2000 Presidential Election," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 389-409, February.
    5. Stephen Coate & Brian Knight, 2007. "Socially Optimal Districting: A Theoretical and Empirical Exploration," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1409-1471.
    6. Stephen Ansolabehere & John M. de Figueiredo & James M. Snyder Jr, 2003. "Why is There so Little Money in U.S. Politics?," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 105-130, Winter.
    7. Bombardini, Matilde & Trebbi, Francesco, 2011. "Votes or money? Theory and evidence from the US Congress," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 587-611, August.
    8. Chatterji, Aaron K. & Kim, Joowon & McDevitt, Ryan C., 2018. "School spirit: Legislator school ties and state funding for higher education," Journal of Public Economics, Elsevier, vol. 164(C), pages 254-269.
    9. Kroszner, Randall S & Stratmann, Thomas, 1998. "Interest-Group Competition and the Organization of Congress: Theory and Evidence from Financial Services' Political Action Committees," American Economic Review, American Economic Association, vol. 88(5), pages 1163-1187, December.
    10. Cain, Bruce E., 1985. "Assessing the Partisan Effects of Redistricting," American Political Science Review, Cambridge University Press, vol. 79(2), pages 320-333, June.
    11. Brian Kelleher Richter & Timothy Werner, 2017. "Campaign Contributions from Corporate Executives in Lieu of Political Action Committees," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 33(3), pages 443-474.
    12. Erikson, Robert S. & Palfrey, Thomas R., 2000. "Equilibria in Campaign Spending Games: Theory and Data," American Political Science Review, Cambridge University Press, vol. 94(3), pages 595-609, September.
    13. Stratmann, Thomas, 1995. "Campaign Contributions and Congressional Voting: Does the Timing of Contributions Matter?," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 127-136, February.
    14. Kim, Chansog (Francis) & Pantzalis, Christos & Chul Park, Jung, 2012. "Political geography and stock returns: The value and risk implications of proximity to political power," Journal of Financial Economics, Elsevier, vol. 106(1), pages 196-228.
    15. Brandon Julio & Youngsuk Yook, 2012. "Political Uncertainty and Corporate Investment Cycles," Journal of Finance, American Finance Association, vol. 67(1), pages 45-84, February.
    16. Faccio, Mara & Parsley, David C., 2009. "Sudden Deaths: Taking Stock of Geographic Ties," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(3), pages 683-718, June.
    17. Nolan McCarty & Keith T. Poole & Howard Rosenthal, 2009. "Does Gerrymandering Cause Polarization?," American Journal of Political Science, John Wiley & Sons, vol. 53(3), pages 666-680, July.
    18. Adam Fremeth & Brian Kelleher Richter & Brandon Schaufele, 2013. "Campaign Contributions over CEOs' Careers," American Economic Journal: Applied Economics, American Economic Association, vol. 5(3), pages 170-188, July.
    19. Denzau, Arthur T. & Munger, Michael C., 1986. "Legislators and Interest Groups: How Unorganized Interests Get Represented," American Political Science Review, Cambridge University Press, vol. 80(1), pages 89-106, March.
    20. Tilman Klumpp & Hugo M. Mialon & Michael A. Williams, 2016. "The Business of American Democracy: Citizens United, Independent Spending, and Elections," Journal of Law and Economics, University of Chicago Press, vol. 59(1), pages 1-43.
    21. Roland G. Fryer Jr. & Richard Holden, 2011. "Measuring the Compactness of Political Districting Plans," Journal of Law and Economics, University of Chicago Press, vol. 54(3), pages 493-535.
    22. Snyder, James M, Jr, 1990. "Campaign Contributions as Investments: The U.S. House of Representatives, 1980-1986," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1195-1227, December.
    23. Snyder, James M, Jr, 1992. "Long-Term Investing in Politicians; or, Give Early, Give Often," Journal of Law and Economics, University of Chicago Press, vol. 35(1), pages 15-43, April.
    24. Stratmann, Thomas, 1998. "The Market for Congressional Votes: Is Timing of Contributions Everything?," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 85-113, April.
    25. Amore, Mario Daniele & Bennedsen, Morten, 2013. "The value of local political connections in a low-corruption environment," Journal of Financial Economics, Elsevier, vol. 110(2), pages 387-402.
    26. Fisman David & Fisman Raymond J. & Galef Julia & Khurana Rakesh & Wang Yongxiang, 2012. "Estimating the Value of Connections to Vice-President Cheney," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(3), pages 1-20, December.
    27. Gao, Meng & Huang, Jiekun, 2016. "Capitalizing on Capitol Hill: Informed trading by hedge fund managers," Journal of Financial Economics, Elsevier, vol. 121(3), pages 521-545.
    28. de Figueiredo, John M & Silverman, Brian S, 2006. "Academic Earmarks and the Returns to Lobbying," Journal of Law and Economics, University of Chicago Press, vol. 49(2), pages 597-625, October.
    29. Marianne Bertrand & Matilde Bombardini & Francesco Trebbi, 2014. "Is It Whom You Know or What You Know? An Empirical Assessment of the Lobbying Process," American Economic Review, American Economic Association, vol. 104(12), pages 3885-3920, December.
    30. García, Diego & Norli, Øyvind, 2012. "Geographic dispersion and stock returns," Journal of Financial Economics, Elsevier, vol. 106(3), pages 547-565.
    31. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
    32. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    33. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    34. John N. Friedman & Richard T. Holden, 2008. "Optimal Gerrymandering: Sometimes Pack, but Never Crack," American Economic Review, American Economic Association, vol. 98(1), pages 113-144, March.
    35. Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tandel, Vaidehi & Gandhi, Sahil & Tabarrok, Alex, 2023. "Building networks: Investigating the quid pro quo between local politicians & developers," Journal of Development Economics, Elsevier, vol. 164(C).
    2. Artés, Joaquín & Kaufman, Aaron Russell & Richter, Brian Kelleher & Timmons, Jeffrey F., 2022. "Are Firms Gerrymandered?," Working Papers 320, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ilona Babenko & Viktar Fedaseyeu & Song Zhang, 2017. "Do CEOs affect employees' political choices?," BAFFI CAREFIN Working Papers 1750, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    2. Matilde Bombardini & Francesco Trebbi, 2020. "Empirical Models of Lobbying," Annual Review of Economics, Annual Reviews, vol. 12(1), pages 391-413, August.
    3. Brown, Jeffrey R. & Huang, Jiekun, 2020. "All the president's friends: Political access and firm value," Journal of Financial Economics, Elsevier, vol. 138(2), pages 415-431.
    4. Coulomb, Renaud & Sangnier, Marc, 2014. "The impact of political majorities on firm value: Do electoral promises or friendship connections matter?," Journal of Public Economics, Elsevier, vol. 115(C), pages 158-170.
    5. Coulomb, Renaud & Sangnier, Marc, 2014. "The impact of political majorities on firm value: Do electoral promises or friendship connections matter?," Journal of Public Economics, Elsevier, vol. 115(C), pages 158-170.
    6. Luechinger, Simon & Moser, Christoph, 2014. "The value of the revolving door: Political appointees and the stock market," Journal of Public Economics, Elsevier, vol. 119(C), pages 93-107.
    7. Ovtchinnikov, Alexei V. & Pantaleoni, Eva, 2012. "Individual political contributions and firm performance," Journal of Financial Economics, Elsevier, vol. 105(2), pages 367-392.
    8. Jordi Blanes i Vidal & Mirko Draca & Christian Fons-Rosen, 2012. "Revolving Door Lobbyists," American Economic Review, American Economic Association, vol. 102(7), pages 3731-3748, December.
    9. Lehrer, Nimrod David, 2018. "The value of political connections in a multiparty parliamentary democracy: Evidence from the 2015 elections in Israel," European Journal of Political Economy, Elsevier, vol. 53(C), pages 13-58.
    10. Jürgen Huber & Michael Kirchler, 2013. "Corporate campaign contributions and abnormal stock returns after presidential elections," Public Choice, Springer, vol. 156(1), pages 285-307, July.
    11. Claessens, Stijn & Feijen, Erik & Laeven, Luc, 2008. "Political connections and preferential access to finance: The role of campaign contributions," Journal of Financial Economics, Elsevier, vol. 88(3), pages 554-580, June.
    12. Chen, Hui & Parsley, David & Yang, Ya-wen, 2010. "Corporate Lobbying and Financial Performance," MPRA Paper 21114, University Library of Munich, Germany.
    13. Kim, Chansog (Francis) & Pantzalis, Christos & Chul Park, Jung, 2012. "Political geography and stock returns: The value and risk implications of proximity to political power," Journal of Financial Economics, Elsevier, vol. 106(1), pages 196-228.
    14. Luechinger, Simon & Moser, Christoph, 2020. "The European Commission and the revolving door," European Economic Review, Elsevier, vol. 127(C).
    15. Anne-Laure Delatte & Adrien Matray & Noémie Pinardon-Touati, 2020. "Private Credit Under Political Influence: Evidence from France," Working Papers 2020-56, Princeton University. Economics Department..
    16. Wang, Fangjun & Xu, Luying & Zhang, Junrui & Shu, Wei, 2018. "Political connections, internal control and firm value: Evidence from China's anti-corruption campaign," Journal of Business Research, Elsevier, vol. 86(C), pages 53-67.
    17. Tahoun, Ahmed, 2014. "The role of stock ownership by US members of Congress on the market for political favors," Journal of Financial Economics, Elsevier, vol. 111(1), pages 86-110.
    18. Lin, Chih-Yung & Ho, Po-Hsin & Shen, Chung-Hua & Wang, Yu-Chun, 2016. "Political connection, government policy, and investor trading: Evidence from an emerging market," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 153-166.
    19. Quoc-Anh Do & Yen-Teik Lee & Bang Dang Nguyen, 2013. "Political Connections and Firm Value: Evidence from the Regression Discontinuity Design of Close Gubernatorial Elections," Working Papers hal-03460972, HAL.
    20. repec:hal:spmain:info:hdl:2441/65rged1j6o9gl9jvp8a09o3eue is not listed on IDEAS
    21. Croci, Ettore & Pantzalis, Christos & Park, Jung Chul & Petmezas, Dimitris, 2017. "The role of corporate political strategies in M&As," Journal of Corporate Finance, Elsevier, vol. 43(C), pages 260-287.

    More about this item

    Keywords

    Political Geography; Redistricting; Capture Theory; Representation;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:cbscwp:291. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/gsuchus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.