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

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  • Moser, Christoph
  • Lüchinger, Simon

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, industry-wide developments or the omission of further commonly used return predictors. Placebo events for close competitors and alternative dates yield no effects. Effects are larger for top government positions and less anticipated announcements. We also find positive abnormal returns for corporate appointments and positive effects of political connections on procurement volume. Our results suggest that concerns over conflicts of interest created by the revolving door are not unfounded, even in a country with strong institutions.

Suggested Citation

  • Moser, Christoph & Lüchinger, Simon, 2014. "The Value of the Revolving Door: Political Appointees and the Stock Market," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100594, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc14:100594
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    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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