Lobbying Externalities and Competition

Job Market Paper

Abstract: I show that lobbying generates negative externalities, which affect non-lobbying companies. When a piece of new legislation passes in Congress, non-lobbying companies in aggregate lose $1.9bn in market value. I obtain this result using a novel dataset combining comprehensive information on corporate lobbying activity with congressional activity on bills. To explain why negatively affected companies do not lobby, I identify two frictions that hinder them. First, non-lobbying companies do not represent enough voting power to support politicians in the elections. Second, trade associations, which could represent their collective interests, are captured by companies that lobby individually. I demonstrate this mechanism using unique hand-collected data on membership in the main trade associations. These findings have important policy implications: they highlight the economic mechanisms which could be targeted by policies regulating corporate lobbying.

Can be downloaded Here

Presented at HEC PhD Workshop and at Tilburg University

Underwriter Bargaining Power and Corporate Bond Contracts

with Alberto Manconi and Luc Renneboog

Abstract: Using a novel empirical approach, based on a new measure of bargaining power, we show that powerful underwriters drive corporate bond contracts in their favor. Our measure of underwriter power is based on the comparative ability of banks to place bonds. The key feature of our approach is that bargaining power varies for a given underwriter facing different bond issuers at a given point in time, allowing us to separate the effects of bargaining power from those of reputation and certification with a fixed effects strategy. We find that bargaining power increases both underwriter fees and bond offering yields, to an increased combined cost of USD 1.5 million, or 7% of the average costs for the issuer. We rule out a number of alternative mechanisms, notably issuer-underwriter “loyalty”. Our findings are in line with the predictions of the market dominance and agency theories.

Can be downloaded Here

Featured at Harvard Law School Forum on Corporate Governance and Financial Regulation

Presented at UBC Sauder, UWash Foster, Alberta School of Business, TADC LBS, EBRD London, 6th ACFC Manchester, and Tilburg University

Are Star Lawyers Also Better Lawyers?

with Allen Ferrell, Alberto Manconi, William Powley and Luc Renneboog