From K Street to Wall Street: Political Connections and Stock Recommendations

• 成果类型: Article
• 署名作者: Christensen, Dane M.; Mikhail, Michael B.; Walther, Beverly R.; Wellman, Laura A.
• 署名单位: University of Oregon; University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital; Northwestern University; Utah System of Higher Education; University of Utah
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-51550
• 发表日期: 2017
• 页码: 87-112
• 关键词: ANALYSTS EARNINGS FORECASTS; mutual fund performance; self-selection; Managers; accuracy; strategy; industry; INFORMATION; INVESTMENT; decisions

摘要

In this study, we examine whether sell-side security analysts gain access to value-relevant information through political connections. We measure analysts' political connections based on political contributions at the brokerage-house level. We argue that if brokerages are able to obtain private information through their political connections, then analysts at politically connected brokerages should issue more profitable stock recommendations, and this increased profitability should be more pronounced for politically sensitive stocks. Our evidence is consistent with these predictions. Analyses of recommendations issued surrounding the Affordable Care Act further support our main inferences. Moreover, our findings hold after we employ numerous tests to address correlated omitted variables and endogeneity. Collectively, these results suggest that brokerages obtain value-relevant, nonpublic information from their political connections.