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Corporate lobbying and firm performance variability

Author

Listed:
  • Girard, Alexandre
  • Gnabo, Jean-Yves
  • Londoño van Rutten, Rodrigo

Abstract

This paper is the first to provide empirical evidence that higher lobbying expenditures are associated with higher operational performance variability. Using data from S&P1500 firms over the 2000–2020 period, our estimates indicate a positive relationship between lobbying expenditures and the variability of return on asset and return on equity. Addressing the endogeneity concerns by applying a control function approach, we find results consistent with the view that the management of lobbying firms takes riskier investment decisions.

Suggested Citation

  • Girard, Alexandre & Gnabo, Jean-Yves & Londoño van Rutten, Rodrigo, 2023. "Corporate lobbying and firm performance variability," Finance Research Letters, Elsevier, vol. 58(PC).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pc:s1544612323008966
    DOI: 10.1016/j.frl.2023.104524
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    More about this item

    Keywords

    Firm performance variability; Firm performance volatility; Lobbying; Moral hazard;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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