Follow the Money

• 成果类型: Article
• 署名作者: Grotteria, Marco
• 署名单位: University of London; London Business School
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdad041
• 发表日期: 2024
• 页码: 1122-1161
• 关键词: product market competition; cross-section; political uncertainty; habit formation; RISK; DYNAMICS; GROWTH; INVESTMENT; POLICY; INNOVATION

摘要

I study, both empirically and theoretically, the economic and financial consequences of corporate lobbying. Firms lobby politicians to increase their share of government contracts, but political competition creates firm-level risk, inflating their cost of capital and reducing their incentive to invest in research and development (R&D). I document an annual 6-8% return premium for stocks of high-lobbying firms, which compensates investors for political risk. An estimated model in which firms can lobby and innovate and investors are risk averse replicates key features of corporate lobbying in the U.S., including the well-established paradox that lobbying contributions are small relative to the policies at stake. The model predicts that if investors ceased seeking compensation for political risk, R&D investment would increase by 6% and the innovation rate by 0.4% points. The risk-premium costs of lobbying are quantitatively and economically important even if the resources wasted on lobbying are objectively small.