Incorporated in Westminster: Channels and Returns to Political Connection in the United Kingdom

Colin Green () and Swarnodeep Homroy

Economica, 2022, vol. 89, issue 354, 377-408

Abstract: In 2002, an amendment to UK parliamentary regulations removed restrictions on the participation of Members of Parliament (MPs) in parliamentary proceedings related to their corporate interests. Using this amendment, we demonstrate higher equity returns for FTSE 350 firms connected to an MP due to the increase in the expected value of political access. Following the amendment, MPs with corporate connections are more likely to be members of parliamentary select and joint committees where legislative bills are drafted. They also attend more committee meetings relative to MPs without corporate connections. Firms react to the increased value of direct political access by rebalancing their political activities. We demonstrate that firms shift board appointments towards sitting MPs, away from other politicians, and reduce their political donations. The benefits of higher political access are greater for firms with family ownership and lower accounting transparency.

Date: 2022
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