Lobbying in Finance Industry: Evidence from US Banking System

Omer Unsal, M. Kabir Hassan and William J. Hippler

No 2017-WP-03, NFI Working Papers from Indiana State University, Scott College of Business, Networks Financial Institute

Abstract: We examine the relationship between corporate lobbying, shareholder-based litigation outcomes, and firm value for financial firms. First, we show that political lobbying lowers the litigation likelihood for financial institutions. Secondly, lobbying firms experience a higher likelihood of having litigation dismissed, and the average settlement amount is significantly lower for lobbying institutions. In addition, shortly after a litigation announcement, lobbying firms experience significantly higher cumulative abnormal returns (CARs), compared to non-lobbying firms. Finally, we show that lobbying firms have higher long-run buy-and-hold abnormal stock returns (BHARs) following lobbying activities. Our results link financial institution lobbying activity with improved legal outcomes and increases in firm value, implying that lobbying may protect financial institutions from reduced firm value through the building of political capital and reducing litigation costs.

Keywords: Corporate lobbying; corporate fraud; corporate governance (search for similar items in EconPapers)
JEL-codes: G30 G32 G38 K41 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2016-12
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-law
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