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

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  • Simon Luechinger
  • Christoph Moser

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 or industry-wide developments. Placebo events yield no effects. Effects are larger for top government positions and less anticipated announcements. We also find positive abnormal returns for corporate appointments. Our results suggest that conflicts of interest matter also in a country with strong institutions.

Suggested Citation

  • Simon Luechinger & Christoph Moser, 2012. "The Value of the Revolving Door: Political Appointees and the Stock Market," CESifo Working Paper Series 3921, CESifo.
    • Handle: RePEc:ces:ceswps:_3921
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    More about this item

    Keywords

    political appointees; revolving door; conflict of interest; event study; stock market;
    All these keywords.

    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
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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