Power, Scrutiny, and Congressmen’s Favoritism for Friends’ Firms

Quoc-Anh Do, Yen Teik Lee, Bang D. Nguyen and Kieu-Trang Nguyen

No 10760, CESifo Working Paper Series from CESifo

Abstract: Does higher office always lead to more favoritism? We argue that firms may lose their benefit from a connected politicians ascent to higher office, if it entails stricter scrutiny that may reduce favoritism. Around close Congress elections, we find RDD-based evidence of this adverse effect that a politicians win reduces his former classmates firms stock value by 3.2% after a week. Exploiting the entry of Craigslist across the U.S., we find that state-level scrutiny drives this effect. It further varies with politicians power, firm size and governance, and connection strength, and diminishes as a politicians career concern fades over time.

Keywords: favoritism; power; scrutiny; political connection; congressmen; close election; RDD (search for similar items in EconPapers)
JEL-codes: D72 D73 D85 G14 G32 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-bec and nep-pol
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Related works:
Working Paper: Power, Scrutiny, and Congressmen's Favoritism for Friends' Firms (2023)
Working Paper: Power, Scrutiny, and Congressmen's Favoritism for Friends' Firm (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10760

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