Do Campaign Contributions and Lobbying Expenditures by Firms Create “Political” Capital?

Hersch, Philip; Netter, Jeffry; Pope, Christopher
December 2008
Atlantic Economic Journal;Dec2008, Vol. 36 Issue 4, p395
Academic Journal
We examine the relation between a firm’s campaign contributions and lobbying expenditures and its Tobin’s q. We follow other studies that use q to measure the value of the firm’s intangible capital (e.g., the value of advertising, R&D, or environmental performance). Researchers have found a positive and significant relation between intangible assets and q. If political capital exists, it is an intangible asset. However, we find little relation between q and political contributions, suggesting that campaign contributions may not have long term effects on political markets. This is consistent with the view that contributions are done by firms as a response to a short term opportunity not as a way of building long-term political capital.


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