Is the revolving door of Washington a back door to excess corporate returns?

Mehmet I. Canayaz, Jose V. Martinez and Han Ozsoylev
Additional contact information
Mehmet I. Canayaz: Said Business School, University of Oxford
Jose V. Martinez: School of Business, University of Connecticut

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

Abstract: In this paper, we look into the so-called "revolving door of Washington", which is the movement of individuals between federal government positions and jobs in the private sector, and examine its link to long-run stock returns. We find that firms where current public officials become future employees outperform other firms by a statistically significant 7.43% per year in terms of four-factor alpha. This result is robust to different weighting methodologies and risk adjustments, and to plausible reverse causality arguments. We also show that firms receive more valuable government contracts from a government agency when a future firm employee is holding a post at that agency. Such financial gains are significantly reduced during periods in which presidential executive orders restrict revolving door movements. Our results are consistent with the notion that some public officials could be favoring certain companies while in office with a view to gaining future corporate employment.

Keywords: Corporate political connections; government contracts; regulatory capture; revolving door. (search for similar items in EconPapers)
JEL-codes: D73 G12 G18 L51 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2015-05
New Economics Papers: this item is included in nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1507.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1507.pdf [301 Moved Permanently]--> https://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1507.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:koc:wpaper:1507

Access Statistics for this paper

More papers in Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum Contact information at EDIRC.
Bibliographic data for series maintained by Sumru Oz ().