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EXECUTIVES IN POLITICS

Ilona Babenko, Viktar Fedaseyeu and Song Zhang

No 1762, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: Between 1980 and 2014, the share of politicians in federal office who held a corporate executive position prior to being elected increased from 13.5% to 21.2%, while the likelihood that an executive runs for federal elective office doubled over the same period. Firms whose executives win federal elections experience significant positive stock returns around the dates of such elections and around the dates when Congress passes legislation introduced by their former executives. Relative to non-businessman politicians, we show that businessman politicians are not more effective at introducing or passing legislation but are significantly more likely to vote for legislation supported by pro-business interest groups and less likely to vote for legislation supported by labor unions or consumer advocacy groups. Businessman politicians have a 44.4% higher likelihood of winning elections, and executives with a good track record at their firms are more likely to run for political office. Our results indicate that business representatives have increased their direct involvement in the legislative process in the United States and that this involvement may have generated substantial benefits for their firms. American voters appear to value business experience in political candidates, even though, once elected, such candidates are not more effective legislators than other politicians.

Keywords: businessman politicians; executives; corporate political connections (search for similar items in EconPapers)
JEL-codes: G32 G38 D72 G30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm and nep-pol
Date: 2017
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