Abstract
Industry-level regulation is a main concern for firms. Normally, companies oppose regulation, since they view it as costly and an impediment to business activities. Hence, firms in highly regulated industries should be more interested in being connected with politicians. By exploiting a unique database, this chapter investigates whether listed firms of the most regulated industries in the United States are more likely to be politically connected. Furthermore, it investigates whether listed firms of the most regulated industries are more likely to be politically connected when a recession occurs. To the author’s knowledge, no studies exhaustively investigate the probability of a firm to be politically connected depending on its industry-level regulation. Furthermore, the long period of time (1999–2014) allows to take into account recessions, and hence analyze if this probability changes depending on the phases of economic cycles. The results show that industry-level regulation matters in establishing political connections.
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Notes
- 1.
From here onward, former directors, corporate executives, and founders entering politics are simply considered as businessmen entering politics.
- 2.
Data are subject to availability. Positions which are frequently accorded cabinet-level rank are considered.
- 3.
As reported on the SEC website (https://www.sec.gov/edgar/searchedgar/cik.htm), CIK is used to identify both corporations and people having filed disclosure with the SEC.
- 4.
Since data are downloaded by using a list of Ticker symbols, those firms are selected, too.
- 5.
With respect to the fiscal year end, financial statement data are lagged by 1 year plus 90 days (the deadline for the publicly traded companies to submit annual reports to the SEC).
References
Al-Ubaydli, O., & McLaughlin, P. A. “RegData: A numerical database on industry-specific regulations for all United States industries and federal regulations, 1997–2012.” Regulation & Governance (2015). doi: 10.1111/rego.12107.
Gorodnichenko, Y., & Weber, M. “Are Sticky Prices Costly? Evidence from the Stock Market.” (online appendix) American Economic Review, 106(2016): 165–199.
McLaughlin, P.A., & Sherouse, O. “The Impact of Federal Regulation on the 50 States.” 2016 ed. (Arlington, VA: Mercatus Center at George Mason University, 2016).
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Carboni, M. (2017). Political Connections and Industry-Level Regulation. In: The Financial Impact of Political Connections. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-52776-5_3
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DOI: https://doi.org/10.1007/978-3-319-52776-5_3
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