Lobbying as a potent political marketing tool for firm performance: A closer look

This study endeavors to enhance political marketing literature about the impact of lobbying on firm performance. Our sample is composed of 140 U.S. firms and spans the years 2007–2014 to encompass the 2007–2009 recession and the subsequent recovery period. Our findings indicate that lobbying expenses positively contribute to firm performance. Also, government contracts in both ways, dollar amount and number of government contracts, act as mediators between lobbying expenses and firm performance. In addition, organizational slack moderates the relationship between lobbying expenses and government contracts. The managerial implications suggest that lobbying expenses can be leveraged as a potent tool for firm performance. Firms with larger lobbying efforts acquired both, higher dollar amounts and a greater number of government contracts.     

Resistance to Trade Liberalization in Unionized Sector

This paper studies the lobbying against trade liberalization by both a firm and a union in the same industry. We find that the relationship between their political activities depends on the effect of political activity by one on the marginal effectiveness of political activity by the other. We also show that, when they are strongly risk-averse and their political activities are strategic complements, trade liberalization is likely to be successful if business is brisk, the foreign firm's production cost is high or the number of union members is small. However, when they are not strongly risk-averse, these results hold reversely.     

Are We Better Off if Our Politicians Have More Information?

The model of public policy studied in this paper has heterogeneous citizens/voters and two public goods: one (roads) chosen directly by an elected policy‐maker, and the other (pollution) stochastically dependent on the amount of roads. Both a one‐country and a two‐country version of the model are analyzed; the latter displays externalities across the countries which create incentives for free riding and strategic delegation. The welfare effects of providing the policy‐maker with information about the relationship between roads and pollution are investigated, and it is shown that more information hurts some—sometimes even all—citizens. In particular, the opportunity not to create an institution for information gathering can serve as a commitment device for a country, although with the unfortunate effect of making the overall outcome even worse. Implications for the welfare effects of “informational lobbying” are also discussed.     

Rent Seeking with Efforts and Bids

We introduce bids in a rent-seeking contest. Players compete for a prize. Apart from exerting lobbying efforts, they also submit a bid which is payable only if they win the prize. We show that our model has a unique Nash equilibrium in pure strategies, in which each active player submits the same bid, while the sum of all efforts equals that bid. In equilibrium there is underdissipation of rent.     

Corporate Lobbying, Regulatory Conduct and the Porter Hypothesis

Michael Porter, the influential Harvard management guru, has promoted the idea that compliance with stricter environmental regulations can afford secondary benefits to firms through improved product design, innovation, corporate morale and in other ways. Once these secondary benefits are factored, the net cost of compliance is argued to be lower than conventionally thought and may even be negative. Whilst environmental economists have rejected the Porter Hypothesis as being based on excessively optimistic expectations of the likely size of such secondary benefits the underlying ideas do enjoy significant credence in the business community. In the context of a lobbying model of regulatory policy-making we argue that the EPA should change the way it conducts regulatory policy to take account of Porter's views – even if it knows those views to be misguided. The model serves to illustrate the more general point that fashions in management thinking can be expected to impact the optimal conduct of regulatory policy.     

The Influence of Vested Interests on Healthcare Legislation in the USA, 2009–2010

Collective lobbying organizations and some big companies acted as cautious partners in the design of the Affordable Care Act of the Obama Administration. In addition to being consulted by government executives, these entities intensively lobbied legislators. The qualitative and statistical analysis I conduct here shows a positive impact of healthcare lobbying. Collective lobbying organizations have a significant impact on lawmaking and complementary lobbying enhances their impact. However, not all (disjointed) lobbying is successful. Perspective-based distortion might explain why organizations lobby on issues against all odds of ever being effective.     

Corporate Lobbying and Firm Performance

Corporate lobbying activities are designed to influence legislators, regulators and courts, presumably to encourage favorable policies and/or outcomes. In dollar terms, corporate lobbying expenditures are typically one or even two orders of magnitude larger than spending by Political Action Committees (PAC), and, unlike PAC donations, lobbying amounts are direct corporate expenditures. We use data made available by the Lobbying Disclosure Act of 1995 to examine this more pervasive form of corporate political activity. We find that, on average, lobbying is positively related to accounting and market measures of financial performance. These results are robust across a number of empirical specifications. We also report market performance evidence using a portfolio approach. We find that portfolios of firms with the highest lobbying intensities significantly outperform their benchmarks in the three years following portfolio formation.     

Too-Big-To-Fail: Why Megabanks Have Not Become Smaller Since the Global Financial Crisis?

ABSTRACT

More than ten years after the global financial crisis, what has happened to the ‘too-big-to-fail’ (TBTF) banks whose reckless behavior was among its preconditions, but which received public support and guarantees in the midst of that crisis? Insofar as this too-big-to-fail status helped create the crisis and then imposed costs on the rest of society, we would expect these banks to have shrunk. We investigate the evolution of 31 global-TBTF banks and find that their overall size has hardly recorded any substantial change. However, there is no sense of urgency in the flourishing post-crisis literature on TBTF banks about the need to contain their size; the prevalent view therein is that if properly regulated, the risks that arise from a financial system dominated by TBTF banks are manageable. This view rests on the same overly narrow theoretical underpinnings whose flaws were exposed in the crisis. We argue that too-big-to-fail banking is embedded in a set of self-reinforcing policies—consolidation, balance-sheet support through quantitative easing, favorable regulations, bank lobbying, and geo-economic and geo-political considerations—which explain why these banks have not shrunk and why they remain a threat to financial stability, well after the lessons of the crisis should have been learned.     

Splitting Accountability Hairs: Anomalies in the Adaptation of IFRS for SMEs in the UK and Ireland

Abstract

Recent years have witnessed a significant shift in the financial reporting frameworks available in the UK and Ireland affecting entities of all sizes with the Financial Reporting Council issuing three financial reporting standards replacing the extant UK GAAP. This paper reports the results of a content analysis of 151 comment letters sent to the standard-setter in response to its policy proposal. The paper explains why the standard-setter stepped back from its controversial proposal to enforce IFRS for SMEs based on the absence of public accountability. Additionally, the standard-setter addressed all concerns positively apart from two, representing two anomalies. First, despite being opposed by the majority of the respondents, the standard-setter published a new framework for wholly-owned subsidiaries of listed companies allowing them to make substantially less disclosure. Second, the standard-setter is yet to respond to the call by the accounting profession and the Not-for-profit sector to publish a sector-specific framework.     

The Siting of Hazardous Waste Facilities in Federal Systems: The Political Economy of NIMBY

This paper offers a new political economy explanation for thepervasive problem of siting hazardous waste treatment facilitiesin federal system. We first show that a decentralized systemyields the first-best waste treatment capacity level and that acentralized structure gives rise to free-riding behavior amonglocal jurisdictions. In our model, each community seeks toinfluence the central government through political contributions.This leads to suboptimal levels of treatment capacity. Thecapacity is increasing in the compensation level if the marginalbenefit of treatment capacity is sufficiently large, and in thegovernment's weight on aggregate social welfare relative tolobbying activities. The centralized system can replicate thedecentralized system with a sufficiently high compensation level.Since compensation has proved difficult, a centralized systemfaces greater obstacles than a decentralized system.