Ran across an interesting research paper tonight in the Business and Politics journal. The paper, “Corporate Lobbying Revisited”, by Jin-Hyuk Kim of Cornell University, attempts to measure the return on corporate spending on lobbyist services. You can see the paper by clicking here.
Kim’s conclusion, is that money spent on lobbying Congress appears to have a return higher than the firm’s cost of capital. Doubling expenditures on lobbying increases the firm’s equity returns by 2.5 percent unadjusted, 2.4 percent relative to the market, and 1.3 percent relative to the industry. While the results do not appear to be very robust (the estimates move around when he changes the specification of the model) this is an important question that merits more work.