PAC Contributions Research Articles

Policy Risk, Corporate Political Strategies, and the Cost of Debt

We examine how political geography affects firms’ cost of debt. Local policy risk, measured by proximity to political power reflected in firms’ position in the country’s political map, is positively related to firms’ cost of debt. Employing a difference-in-difference-in-differences (DDD) estimation around presidential elections, we find that firms headquartered in states that become more aligned with the president after elections are exposed to more policy risk and thus incur higher yield spreads. Firms can manage policy risk by engaging in corporate political strategies. Consistent with the view that such political strategies protect firms against uncertainty about future policies, we find policy risk has less of an impact on a firm’s cost of debt when the firm makes more PAC contributions or spends more money on lobbying..

Research Article: Hispanics and Environmental Voting in the US Congress

We compare the environmental voting behavior of Hispanic congressional members with those of White and African American members, seek to explain disparities in long-term voting trends, and discuss the implications for future environmental policy development. We analyzed congressional members' voting behavior from 1995 to 2006. Multivariate regression models were employed to determine what factors explain racial disparities in voting. Hispanic members were more likely than White, but less likely than African American, to vote proenvironmentally throughout the period. Results show political party increasingly explains this difference. This is because Democrats and Republicans have become increasingly polarized around environmental issues while at the same time racial disparities in party membership in Congress, largely due to increasing Hispanic membership, have also widened. Although oil-and-gas PAC contributions, region, and other variables are also significant predictors of proenvironmental voting, these...

The Political Economy of 'Currency Manipulation' Bashing

One of the most frequently debated issues in Congress over the past few years has been the value of the Chinese renminbi (RMB) relative to the dollar. It is no secret that congressmen in the U.S. frequently accuse China of being a “currency manipulator.” This paper has two objectives. First, it investigates the extent to which PAC contributions from key interest groups influences the frequency with which congressmen criticize China’s exchange rate policy, controlling for other factors. The results indicate that the odds that a congressman will call China a “currency manipulator” are 1.35 times higher for every additional $5,000 in PAC contributions from groups that favor legislation against China. The odds go up to 1.8 for an additional $10,000 in PAC contributions. Second, it investigates the consequences that “currency manipulation” bashing may have on the rate at which the RMB appreciates against the U.S. dollar. The results for a VAR model indicate that an increase in the incidence of “currency manipulation” bashing appears to slow down, rather than accelerate, the rate at which the Renmibi appreciates against the dollar. This last result suggests that bashing China may actually be counterproductive.

Bribery or just desserts? Evidence on the influence of Congressional reproductive policy voting patterns on PAC contributions from exogenous variation in the sex mix of legislator offspring

Evidence on the relationship between political contributions and legislators’ voting behavior is marred by concerns about endogeneity in the estimation process. Using a legislator’s offspring sex mix as a truly exogenous variable, we employ an instrumental variable estimation procedure to predict the effect of voting behavior on political contributions. Following previous research, we find that a legislator’s proportion daughters has a significant effect on voting behavior for women’s issues, as measured by score in the “Congressional Record on Choice” issued by NARAL Pro-Choice America. In the second stage, we make a unique contribution by demonstrating a significant impact of exogenous voting behavior on PAC contributions, lending further credibility to the hypothesis that Political Action Committees respond to legislators’ voting patterns by “rewarding” political candidates that vote in line with the positions of the PAC, rather than affecting those same votes – at least in this high-profile policy domain.

Why Advocacy Must Be Routine Part of Our Work

Why Advocacy Must Be Routine Part of Our Work

The $700 Billion Bailout: A Public-Choice Interpretation

On September 29, 2008, the U.S. House of Representatives voted to reject HR 3997 (known as the original $700 Billion Bailout Bill). On October 3, the House reversed course and voted to approve the Emergency Economic Stabilization Act of 2008 (EESA). This paper applies a political voting model to these two House votes – the rejection of the bill on September 29 and its passage on October 3. Both economic conditions and PAC contributions matter in explaining the two votes, but their effect is attenuated by the individual legislator’s power. PAC contributions from the American Bankers Association appear to matter for explaining those legislators who switched. The role of ideology in explaining either the September 29 or October 3 vote is limited.

Policy Agendas, Party Control, and PAC Contributions in the American States

In this research we hypothesize that aggregate PAC behavior is conditional in nature. PACs in a specific issue sector donate more to a certain political party's candidates the more that political party controls the legislature. However, the more active the legislature is on a specific set of issues the more people/groups/PACs are mobilized in response to the issue. Thus, a conditional relationship emerges where aggregate PAC donations to a political party are a function of party control, agenda activity, and an interaction of the two. We test this conditional theory using data from the Institute on Money in State Politics database on PAC donations to state legislative candidates divided into issue sectors. Our results provide support for our hypotheses that aggregate PAC donations to a political party's candidates are conditional on the level of agenda activity on the issues that concern the PACs.

The Effects of Interest Groups' Ideology on Their PAC and Lobbying Expenditures

While the literature on political action committees' (PACs) contributions to congressional campaigns is substantial, one key variable has been missing: the ideology of the PAC. Such a measure is needed to evaluate a normatively important yet unanswered question: to what extent do PACs give to candidates with whom they agree ideologically, as opposed to candidates they may want to influence after the election? This study shows that many interest groups' preferences for an electoral strategy or an access strategy can be predicted by their left-right ideology and their level of ideological extremism. The analysis finds that more ideologically extreme groups and more liberal groups spend more money on PAC contributions relative to lobbying. Further, groups' underlying left-right ideology is also highly predictive of their allocation of PAC contributions between the two parties—even controlling for group type.

The Effects of Organizational and Political Embeddedness on Financial Malfeasance in the Largest U.S. Corporations

This article examines the causes of financial malfeasance in the largest U.S. corporations between 1995 and 2004. The findings support organizational-political embeddedness theory, which suggests that differential social structures create dependencies, incentives, and opportunities to engage in financial malfeasance. The historical analysis shows that neoliberal policies enacted between 1986 and 2000 resulted in organizational and political structures that permitted managers to engage in financial malfeasance. Our quantitative analysis provides three main findings. First, capital dependence on investors creates incentives to engage in financial malfeasance. Second, managerial strategies to increase shareholder value create incentives to engage in financial malfeasance. Third, the multilayer-subsidiary form and the political structure permitting corporate PAC contributions create opportunities to engage in financial malfeasance. These findings have important implications for public policy; the corporate and state structures enacted in the late-twentieth century were the outcome of a long-term, well-financed, and systematic political strategy that provided managers with unprecedented power, autonomy, and opportunity to engage in financial malfeasance.

Congressional Parties and the Mobilization of Leadership PAC Contributions

Traditionally, observers have characterized leadership political action committees (LPACs) as tools used by political entrepreneurs to build personal coalitions supporting their power and policy goals. We argue that political context — namely, competition for control of the House and the advancement structures created by the parties — shapes the way House members use LPAC contributions to advance their careers. As congressional parties have become more oriented towards attaining majority status since the GOP takeover in 1995, LPAC contributions should have shifted towards helping the party win majority status rather than building individual coalitions. We use rare events logit to estimate the probability of incumbent to candidate contributions in the 1990, 1998 and 2004 election cycles. Our evidence shows that Democratic, but not Republican, LPAC contributions have generally become more party-centred as party margins have tightened.

Putting a Face on the Issue

Business scholars pay increasing attention to the expanded influence of stakeholders on firm strategies, legitimacy, and competitiveness. At the same time, analysts have noted that the transformed regulatory and legislative environments of recent decades have encouraged firms to become much more politically active. Surprisingly, relatively little research has tied together these two trends. The present study integrates perspectives on stakeholder management with research on corporate political activity to develop an understanding of the structural sources of stakeholder mobilization in professional grassroots lobbying campaigns. This study employs a unique, original data source to consider how the adoption of grassroots lobbying by a firm relates to its industry, degree of inside lobbying, partisan PAC contributions, and more. This research shows that corporate grassroots lobbying is shaped most significantly by a firm's degree of inside lobbying, as highly active firms take a diversified strategy for gaining influence. Firms in industries with a heavy public presence as well as those concerned with taxation, government appropriations, and economic development also adopt these strategies readily. PAC contributions to Republican, but not Democratic, candidates also heighten firms' propensity to lobby the public.

How Close is Fundraising in Contested Elections in States with Low Contribution Limits?

Abstract This paper investigates the impact of contribution limits in campaign finance systems on the competitiveness of elections. Theoretically, contribution limits can have different and potentially opposite effects in an election: one effect could be that limits curtail the fundraising ability of incumbents, decreasing their campaign power; another could be that they limit challengers’ ability to raise money, exacerbating the structural advantages of incumbents. In this paper, I examine the effect of low contribution limits on the gap in fundraising between incumbents and challengers, and between candidates in open seat races, using data from state house elections over a decade between 1996 and 2006. Specifically, I consider individual and PAC contribution limits at three levels: (a) $500 and below, (b) $501-$1,000, (c) $1,001-$2,000, all of them evaluated against contribution limits greater than $2,000. The findings are that contribution limits diminish the relative difference in fundraising levels between incumbents and challengers, and increase the share of challenger spending as a percentage of total race spending. For example, $500 limits reduce the fundraising gap between incumbents and challengers by twenty percent. The data also show that limits narrow the contribution gap in open seat races. Individual and PAC contribution limits of $500 and below diminish fundraising gaps between the major party candidates by between twelve and fourteen percent.

The $700 Billion Bailout: A Public-Choice Interpretation

On September 29, 2008, the House of Representatives voted to reject HR 3997 (known as the original $700 Billion Bailout Bill). On October 3, the House reversed course and voted to approve the Emergency Economic Stabilization Act of 2008 (EESA). This paper applies a political voting model to these two House votes - the rejection of the bill on September 29 and its passage on October 3. Both economic conditions and PAC contributions matter in explaining the two votes, but their effect is attenuated by legislator's power. PAC contributions from the American Bankers Association appear to matter for explaining the legislators who switched. The role of ideology in explaining either the September 29 or October 3 vote is limited.

Corporate PACs and the Stock Market

The 2004 U.S. presidential election was very close. Rumors from exit polls on Election Day showed that John Kerry would likely win, but the actual vote counts revealed on Tuesday night and early Wednesday morning showed that George Bush had been re-elected. This sets up a natural experiment for studying the shareholder-wealth impact of rumor and eventual outcome of election on firms which made an investment in public policy through PAC donations. The authors find that the stock of companies whose PAC contributions favored Democrats performed better on Tuesday and those that favored Republicans performed better on Wednesday. In general, most S&amp;P 500 companies appear to have favored the Republican victory with both their PAC donations and by the reaction of their stock price to election results. <b>TOPIC:</b>Security analysis and valuation

Look Who's Coming to Dinner

House congressional campaign committees (CCCs) have increasingly relied on incumbents for financial support during the past decade. To raise money for their party's CCC, incumbents can (a) contribute to the CCC through their own principal campaign committee and/or leadership PAC or (b) broker contributions from donors. The authors argue that direct incumbent contributions make available to the party campaign committee broader contribution networks than do brokered incumbent contributions. One observable implication of this thesis is that ties to D.C. lobbyists should be a more powerful predictor of brokered than of direct contributions to the CCCs. Comparing Federal Election Commission data on direct member contributions to the National Republican Congressional Committee (NRCC) with unique data on member ticket sales to the 2005 NRCC March Gala, the authors find strong support for this expectation. Soliciting direct contributions from incumbents appears to be a better means for the CCCs to gain access to new campaign money.

The politics of environmental disclosure regulation in the chemical and petroleum industries: Evidence from the Emergency Planning and Community Right-to-Know Act of 1986

Abstract We draw from prior research in political science, management, and accounting to develop a basis from which to examine how corporations try to influence legislation and legislators for their self-interest and deviate from their expected accountability [see Gray R, Owen D, Adams C. Accounting and accountability: changes and challenges in corporate social and environmental reporting. London, UK: Prentice Hall; 1996; Gray R, Dey C, Owen D, Evans R, Zadek S. Struggling with the praxis of social accounting: stakeholders, accountability, audits and procedures. Accounting, Auditing & Accountability Journal 1997;10(3):325–64]. Specifically, we investigate how PAC contributions, a type of corporate political strategy, can be used as a tool for business entities to deviate from their reporting responsibility. The Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA) was drafted and passed immediately following the 1984 Union Carbide gas leak incident in Bhopal, India, as a result of rising environmental concerns and demand for right-to-know regulation. Among other pollution prevention policies and regulations, one feature of this legislation requires firms from certain industries to publicly disclose information related to their toxic chemical releases. This study provides empirical evidence that affected firms were already striving to reduce or mitigate environmental disclosure regulations, using political avenues, despite global environmental crises. The analysis finds that a sample of firms from the chemical and petroleum industries made significant campaign contributions to legislators deemed influential in the passage of the EPCRA. Moreover, we report that this use of political strategy, evidenced by the relatively high amount of contributions, may have affected the roll-call vote on the passage of an EPCRA disclosure-related amendment. Our results are consistent with the argument that firms that will be affected by pending regulations become actively involved in politics to reduce public policy pressure and exposure.

Political contribution caps and lobby formation: Theory and evidence

The perceived importance of “special interest group” money in election campaigns motivates widespread use of caps on allowable contributions. We present a bargaining model in which the effect of a cap that is not too stringent on the amount a lobby can contribute improves its bargaining position relative to the politician. It thus increases the payoff from lobbying, which will therefore increase the equilibrium number of lobbies when lobby formation is endogenous. Caps may then also increase aggregate contributions from lobbies and increase politically motivated government spending. We present empirical evidence from U.S. states that support various predictions of the model. We find a positive effect on the number of PACs formed from enacting laws constraining PAC contributions. Moreover, the estimated effect is non-linear, as predicted by the theoretical model. Very stringent caps reduce the number of PACs, but as the cap increases above a threshold level, the effect becomes positive. Contribution caps in the majority of U.S. states are above this threshold.

Pivotal power brokers: Theory and evidence on political fundraising

This study examines the campaign fundraising success of Senate incumbents that have a unique, pivotal status (legislatively) in the Senate with regards to parliamentary procedures (e.g., the filibuster). Regression estimates place the fundraising advantage, in favor of certain pivotal moderates over all other Senators, at about $2.12 million (in real terms) in total contribution per 2-yr election cycle. Pivotal status is even more significant in explaining variations in PAC contribution in the U.S. Senate, given that individuals who make contributions are not likely to be as interested as PACs in ‘buying policy.’ The results also suggest that Krehbiel’s Pivotal Politics (Krehbiel, K. (1988). Pivotal Politics: A Theory of U.S. lawmaking. Chicago, IL: University of Chicago press.) construct warrants modification, given that it offers prediction about policy outcomes and gridlock intervals without fully incorporating interest group politics of the ‘vote-buying’ or ‘policy-buying’ variety.

The Relationship between Political Parties and Interest Groups: Explaining Patterns of PAC Contributions to Candidates for Congress

The Relationship between Political Parties and Interest Groups: Explaining Patterns of PAC Contributions to Candidates for Congress

Pivotal power brokers: Theory and evidence on political fundraising

This study examines the campaign fundraising success of Senate incumbents that have a unique, pivotal status (legislatively) in the Senate with regards to parliamentary procedures (e.g., the filibuster). Regression estimates place the fundraising advantage, in favor of certain pivotal moderates over all other Senators, at about $2.12 million (in real terms) in total contribution per 2-yr election cycle. Pivotal status is even more significant in explaining variations in PAC contribution in the U.S. Senate, given that individuals who make contributions are not likely to be as interested as PACs in ‘buying policy.’ The results also suggest that Krehbiel’s Pivotal Politics (Krehbiel, K. (1988). Pivotal Politics: A Theory of U.S. lawmaking. Chicago, IL: University of Chicago press.) construct warrants modification, given that it offers prediction about policy outcomes and gridlock intervals without fully incorporating interest group politics of the ‘vote-buying’ or ‘policy-buying’ variety.