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Valuing Changes in Political Networks: Evidence from Campaign Contributions to Close Congressional Elections


  • Pat Akey


This paper investigates the value of firm political connections using a regression discontinuity design in a sample of close, off-cycle U.S. congressional elections. I compare firms donating to winning candidates and firms donating to losing candidates and find that postelection abnormal equity returns are 3% higher for firms donating to winning candidates. Connections to politicians serving on powerful congressional committees, such as appropriations and taxation, are especially valuable and impact contributing firms sales. Firms' campaign contributions are correlated with other political activities such as lobbying and hiring former government employees, suggesting that firms take coordinated actions to build political networks.

Suggested Citation

  • Pat Akey, 2015. "Valuing Changes in Political Networks: Evidence from Campaign Contributions to Close Congressional Elections," Review of Financial Studies, Society for Financial Studies, vol. 28(11), pages 3188-3223.
  • Handle: RePEc:oup:rfinst:v:28:y:2015:i:11:p:3188-3223.

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    1. repec:oup:revfin:v:22:y:2018:i:3:p:849-876. is not listed on IDEAS
    2. repec:eee:corfin:v:49:y:2018:i:c:p:186-203 is not listed on IDEAS
    3. Acemoglu, Daron & Johnson, Simon & Kermani, Amir & Kwak, James & Mitton, Todd, 2016. "The value of connections in turbulent times: Evidence from the United States," Journal of Financial Economics, Elsevier, vol. 121(2), pages 368-391.
    4. Okazaki, Tetsuji & Sawada, Michiru, 2017. "Measuring the extent and implications of corporate political connections in prewar Japan," Explorations in Economic History, Elsevier, vol. 65(C), pages 17-35.
    5. Daron Acemoglu & Tarek A. Hassan & Ahmed Tahoun, 2018. "The Power of the Street: Evidence from Egypt’s Arab Spring," Review of Financial Studies, Society for Financial Studies, vol. 31(1), pages 1-42.
    6. Bradley, Daniel & Pantzalis, Christos & Yuan, Xiaojing, 2016. "Policy risk, corporate political strategies, and the cost of debt," Journal of Corporate Finance, Elsevier, vol. 40(C), pages 254-275.
    7. Jeffrey R. Brown & Jiekun Huang, 2017. "All the President’s Friends: Political Access and Firm Value," NBER Working Papers 23356, National Bureau of Economic Research, Inc.
    8. Natalia Lamberova & Konstantin Sonin, 2018. "Economic transition and the rise of alternative institutions : Political connections in Putin's Russia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 26(4), pages 615-648, October.
    9. repec:eee:corfin:v:51:y:2018:i:c:p:72-97 is not listed on IDEAS
    10. Elvira Sojli & Wing Wah Tham, 2017. "Foreign political connections," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(2), pages 244-266, February.
    11. Ozlem Akin & Nicholas S. Coleman & Christian Fons-Rosen & José-Luis Peydró, 2016. "Political Connections: Evidence From Insider Trading Around TARP," Working Papers 935, Barcelona Graduate School of Economics.
    12. 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.
    13. 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.
    14. repec:eee:ecolet:v:164:y:2018:i:c:p:112-116 is not listed on IDEAS
    15. Kirsten Tangaa Nielsen & Felix von Meyerinck, 2018. "Managerial Networks and Shareholder Value: Evidence from Sudden Deaths," Working Papers on Finance 1821, University of St. Gallen, School of Finance.
    16. Carlos Viana de Carvalho & Eduardo Zilberman & Ruy Ribeiro, "undated". "Sentiment, Electoral Uncertainty and Stock Returns," Textos para discussão 655, Department of Economics PUC-Rio (Brazil).
    17. Ahmed Tahoun & Florin P. Vasvari, 2016. "Political Lending," Working Papers Series 47, Institute for New Economic Thinking.
    18. Gropp, Reint E. & Saadi, Vahid, 2015. "Electoral Credit Supply Cycles Among German Savings Banks," IWH Online 11/2015, Halle Institute for Economic Research (IWH).
    19. Servaes, Henri & Tamayo, Ane, 2017. "The role of social capital in corporations: a review," LSE Research Online Documents on Economics 69209, London School of Economics and Political Science, LSE Library.
    20. repec:eee:jbfina:v:100:y:2019:i:c:p:58-76 is not listed on IDEAS

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