Corporate performance in light of congressional conflicts of interest [electronic resource]
- Joshua David Loud.
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- 1 online resource.
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|3781 2013 L||In-library use|
- While members of Congress must disclose information about their financial assets, there are no restrictions on the types of assets they can hold. This creates conflicts of interest as legislators vote on issues that will affect their personal investments. This dissertation explores the shareholder relationships between members of Congress and the corporations in which they are invested. I begin by examining how they allocate their investments. I use the S& P 500 as a benchmark portfolio to show that legislators' portfolios do not diverge widely from the rest of the market, with a few notable exceptions. In particular, I find mixed evidence that legislators allocate investments to sectors in which they have increased influence. I then assess whether assets issued by firms in which members of Congress have financial stakes yield higher returns than those from otherwise similar firms. I provide several theoretical explanations that would support a finding of excess returns and find no evidence to suggest that firms with congressional shareholders outperform their peers. If anything, the firms with political connections perform slightly worse. This result holds over both long- and medium-term time horizons and is robust to differentiating asset holdings by party, leadership positions, or committee assignments. Lastly, I test whether markets expect these shareholder connections between politicians and firms to be valuable. I conduct three event studies using narrow elections, the public release of the financial disclosure reports, and sudden resignations of members of Congress to demonstrate that market participants do not expect firms with congressional ties to outperform their peers.
- Publication date
- Submitted to the Graduate School of Business.
- Thesis (Ph.D.)--Stanford University, 2013.
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