Corporate Lobbying and Returns to Non-Lobbying Industry Competitors

Paper

Ekaterina Neretina
Author: Ekaterina Neretina

Nbr. Publication(s): 1
Position: Assistant professor
Affiliation: Bocconi University
Member of PolEconFin since: 14 Nov 2024

This paper shows that corporate lobbying generates within-industry effects. Firms that do not lobby experience negative stock returns around the passage of new federal bills and resolutions that attract more lobbying from their competitors. To show that the value losses are related to lobbying, I use plausibly exogenous variation in lobbying intensity generated by lawsuits against lobbyists hired to represent the lobbying firms. The aggregate losses per one piece of legislation are up to $4.9B. They are larger in concentrated industries, and with more product differentiation between lobbying and non-lobbying firms. The non-lobbying firms account for over 65% of the number of publicly listed firms, and they are typically smaller and have fewer resources than their lobbying rivals. I show that these differences manifest in two entry barriers to lobbying in form of: (i) economic and voting power of firms in electoral areas of bill sponsors; and (ii) capture of trade associations by members that also lobby individually.

# Tags: Corporate lobbying | Federal legislation | Political economy | Special interest politics | Trade associations | Voting power

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