Ethics and Corporate Lobbying
45 Pages Posted: 11 Mar 2021
Date Written: August 8, 2019
We explore the exogenous effects of the Honest Leadership and Open Government Act of 2007 (HLGOA), on U.S. corporations. We find that the average market reaction to the reform, which aimed to mitigate unethical lobbying practices, by lobbying firms is positive, implying the reform benefited these shareholders on average. We also uncover heterogeneity of lobbying firms’ response to the reform. Following the Act, firms with a history of active lobbying reduced their lobbying activity, whereas firms with little prior lobbying activity increased their lobbying efforts. Finally, we find that after the enactment of these reforms, firms that engage in active lobbying, and especially those with a good ethical reputation, are more likely to appoint politically connected directors relative to non-lobbying firms.
Keywords: corporate lobbying; ethics; politically connected directors; regulations
JEL Classification: G14, G28, G34, G38, D72
Suggested Citation: Suggested Citation