Follow the money
Subject
Finance
Publishing details
Social Sciences Research Network
Authors / Editors
Grotteria M
Biographies
Publication Year
2018
Abstract
What is the connection among firm lobbying, risk and expected returns? I develop a game-theoretic asset pricing model in which firms lobby to gain or preserve monopolistic rents. The model has four key predictions. First, differences in expected returns are the equilibrium outcome of the strategic interaction among firms, and returns are higher for firms that lobby more. Second, firms that lobby more exhibit larger return volatility. Third, lobbying is less intense in more competitive industries. Fourth, and finally, firms in these industries tend to lobby in coalitions. Congressional data on lobbying spending support the model’s implications
Keywords
Lobbying; Expected returns; Imperfect competition; Strategic interaction
Series
Social Sciences Research Network
Available on ECCH
No
