Political Activism and Market Power

Elia Ferracuti, Roni Michaely and Laura Wellman
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Elia Ferracuti: Duke University - Fuqua School of Business
Laura Wellman: Pennsylvania State University

No 20-60, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Using novel data on firms’ government relations staff, and two distinct empirical settings, we show that political activism enables firms to grow their market power. The documented increases in profit margins and market share persist for up to two years, and are concentrated among large politically active firms. We also utilize firms’ mandatory lobbying disclosures to identify a broad set of legislative actions lobbied for by sample firms, and analyze their strategic actions around those events. Taken together, our results show that politically active firms gain a competitive advantage through strategically timed investments when policy uncertainty is high.

Keywords: Market Power; Political Activism; Policy Uncertainty; Competition; Profitability; Profit Margins; Market Share; Capital Investment (search for similar items in EconPapers)
JEL-codes: D72 G31 G38 P16 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2020-08
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2060

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