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Do Campaign Contributions and Lobbying Expenditures by Firms Create “Political” Capital?

  • Philip Hersch


  • Jeffry Netter


  • Christopher Pope


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    We examine the relation between a firm’s campaign contributions and lobbying expenditures and its Tobin’s q. We follow other studies that use q to measure the value of the firm’s intangible capital (e.g., the value of advertising, R&D, or environmental performance). Researchers have found a positive and significant relation between intangible assets and q. If political capital exists, it is an intangible asset. However, we find little relation between q and political contributions, suggesting that campaign contributions may not have long term effects on political markets. This is consistent with the view that contributions are done by firms as a response to a short term opportunity not as a way of building long-term political capital. Copyright International Atlantic Economic Society 2008

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    Article provided by International Atlantic Economic Society in its journal Atlantic Economic Journal.

    Volume (Year): 36 (2008)
    Issue (Month): 4 (December)
    Pages: 395-405

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    Handle: RePEc:kap:atlecj:v:36:y:2008:i:4:p:395-405
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    1. Davidson, Russell & MacKinnon, James G, 1981. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Econometrica, Econometric Society, vol. 49(3), pages 781-93, May.
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    4. Thomas Stratmann, 2005. "Some talk: Money in politics. A (partial) review of the literature," Public Choice, Springer, vol. 124(1), pages 135-156, July.
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    6. Jayachandran, Seema, 2006. "The Jeffords Effect," Journal of Law and Economics, University of Chicago Press, vol. 49(2), pages 397-425, October.
    7. Gleason, Katherine I. & Klock, Mark S., 2003. "Intangible capital in the pharmaceutical & chemical industry," Working Papers 2003-04, University of New Orleans, Department of Economics and Finance.
    8. 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.
    9. 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.
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