Research seminar: Bringing Connections Onboard: The Value of Political Influence

Colin Green, NTNU: https://www.ntnu.edu/employees/colin.green

Abstract

The connection between politicians and firms remains a controversial issue. We focus on the effect of a change in parliamentary regulation in the U.K. that allowed active members of parliament (MPs) with corporate affiliations to participate in parliamentary debates on issues related to their corporate interests. Firms with political connections to MPs experienced positive abnormal returns and increased profitability due to this change. We provide additional evidence that suggests that these returns reflect an expectation of increased influence and this is a substantial component of the financial returns from political connections. These connections are unlikely to be socially desirable.