Insuring hedged bets with lobbying

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Authors Scott H. Ainsworth, James E. Monogan
Journal/Conference Name INTEREST GROUPS & ADVOCACY
Paper Category
Paper Abstract Much of the research on organized interests concludes that lobbying has little influence on lawmaking. We argue that businesses often need only small actions from politicians in order to secure profitable outcomes in the marketplace. Case studies show how lobbyists affected the Air Cargo Deregulation Act in the 1970s, the Data Quality Act in the 2000s, and the recent Federal Trade Commission investigation of Herbalife. Hedge funds are particularly well situated to profit from small actions by lawmakers, as those political actions affect market values. As a largely unregulated sector, hedge funds are ideal for testing the idea that businesses lobby for directly profitable actions. Our time series analysis demonstrates that spending on lobbying coincides with the value of assets under management in hedge funds and with increases in the federal budget. Although the time series work cannot directly test our theory, our results do fit with the notion that businesses and financial firms treat spending on lobbying as an investment to protect their interests.
Date of publication 2016
Code Programming Language R
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