Corporate lobbying and firm performance variability

Alexandre Girard; Jean-Yves Gnabo; Rodrigo Londoño van Rutten

doi:10.1016/j.frl.2023.104524

Corporate lobbying and firm performance variability

Alexandre Girard
, Jean-Yves Gnabo
, Rodrigo Londoño van Rutten

Research output: Contribution to journal › Article › peer-review

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.

Original language	English
Article number	104524
Journal	Finance Research Letters
Volume	58
DOIs	https://doi.org/10.1016/j.frl.2023.104524
Publication status	Published - Dec 2023

Funding

No funding was received for this work. We further confirm that any aspect of the work covered in this manuscript that has involved human patients has been conducted with the ethical approval of all relevant bodies and that such approvals are acknowledged within the manuscript. ☆ We want to thank Marc Deloof, Hans Degryse, Thomas Lambert and the participants of the Belgian Financial Research Forum 2023 and UCLouvain doctoral workshop.

Keywords

Firm performance variability
Firm performance volatility
Lobbying
Moral hazard

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10.1016/j.frl.2023.104524

Cite this

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title = "Corporate lobbying and firm performance variability",

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.",

keywords = "Firm performance variability, Firm performance volatility, Lobbying, Moral hazard",

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AB - 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.

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KW - Moral hazard

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Corporate lobbying and firm performance variability

Abstract

Funding

Keywords

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