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

Quoc-Anh Do, Yen Teik Lee, Bang D. Nguyen () and Kieu-Trang Nguyen ()
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Bang D. Nguyen: University of Cambridge. Judge Business School, Cambridge
Kieu-Trang Nguyen: Northwestern University. Kellogg School of Management

No 2023-11, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: Does higher office always lead to more favoritism? The usual affirmative answer overlooks scrutiny's role in shaping the pattern of favoritism: It is possible that politicians who attain higher-powered po- sitions under stricter scrutiny may reduce quid-pro-quo favors towards connected firms. Around close Congress elections, we find RDD-based evidence of this adverse effect that a politician's win reduces his former classmates' firms stock value by 1.9% after a day and 3.2% after a week. This effect varies by cross-state level of scrutiny, politician's power, firm size and governance, and connection strength, and diminishes as a politician's career concern fades over time.

Keywords: Favoritism; Power; Scrutiny; Political connection; Congressmen (search for similar items in EconPapers)
JEL-codes: D72 D73 D85 G14 G32 (search for similar items in EconPapers)
Date: 2023-06
New Economics Papers: this item is included in nep-bec, nep-mfd, nep-pol and nep-sea
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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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