Using novel data on White House visitors from 2009 through 2015, we find that corporate executives’ meetings with key policymakers are associated with positive abnormal stock returns. We also find evidence suggesting that following meetings with federal government officials, firms receive more government contracts and are more likely to receive regulatory relief (as measured by the tone of regulatory news). The investment of these firms also becomes less affected by political uncertainty after the meetings. Using the 2016 presidential election as a shock to political access, we find that firms with access to the Obama administration experience significantly lower stock returns following the release of the election result than otherwise similar firms. Overall, our results provide evidence suggesting that political access is of significant value to corporations.In the vernacular - Large companies meeting with officials in the White House obtain significant stock market valuation improvements, improved regulatory relief, and more government contracts. As claimed by Sanders and Trump, the system is rigged. You can buy access to politicians and that access is financially remunerative. In economic terms - There is objective empirical evidence for both regulatory capture and rent seeking via governmental influence.
More coverage from Study documents how profitable access to Obama's White House was by Timothy P. Carney. The study focuses on the Obama years. I would agree that the gap between Obama White House claims (transparency, ethics, fair system, equality before the law) and demonstrated behaviors was shockingly large, and I might accept that perhaps the issue was more extensive under Obama. I suspect, however, that this is actually simply a function of the nature of large government. It might vary by degree between one administration and another but it is always there.
In President Obama's most impressive act of transparency, he published, regularly throughout his tenure, his White House visitor logs. Jeffrey Brown and Jiekun Huang of the University of Illinois studied those logs from Obama's first month through the end of 2015, and found 2,286 White House meetings between Obama officials and executives of the companies included in the S&P 1,500.
The researchers found two notable things about the companies that made up these 2,286 meetings: That money helped the executives get in the door, and getting in the door helped them make money.
The first finding could be put this way: Access could be bought through campaign contributions and lobbying expenditures.
"We find that firms that contributed more to Obama's presidential election campaigns are more likely to have access to the White House. We also find that firms that spend more on lobbying, firms that receive more government contracts, larger firms, and firms with a greater market share are more likely to have access to influential federal officials."
Second, they found that access was profitable.
"Corporate executives' meetings with White House officials are followed by significant positive cumulative abnormal returns." That term, "cumulative abnormal returns," in this case basically means how much the stock in question outperformed the S&P 1500 index over the 10 days before and the 30 days after the meeting. "We also find that the result is driven mainly by meetings with the President and his top aides. We find insignificant CARs for canceled visits, suggesting that the actual incidence of the meetings matters for firm value."
Why would a meeting drive up the stock of a company? The authors posit three mechanisms: A meeting could secure a government contract, it could help line up regulatory relief, or it could simply provide inside information that is valuable to a company.
The researchers had another intriguing finding: "firms with access to the Obama administration experience significantly lower stock returns following the release of the election result than otherwise similar firms."
In other words, their investment in Democrats became a money loser when Trump took over.