XXV Edition

1-2 December 2016"

Endogenous Political Connections

Carboni Marika, University of Rome Tor Vergata
Fiordelisi Franco, University of Rome III

Industry-level regulation plays a crucial role for firms. Generally, companies oppose restrictive regulation, mostly perceived as costly and an obstacle for business activities. Therefore, highly regulated firms should be more interested to be connected with regulators, i.e. politicians, to attempt to make better the regulation impact for themselves. In this paper, we ask if a significant increase in regulation lead affected companies to establish connections with former politicians. We find that after the Dodd-Frank Wall Street Reform and Consumer Protection Act’s passage, companies affected by the new regulation become more likely to hire former politicians as corporate executives and/or to appoint them as directors, providing evidence of a causal link between industry-level regulation and political connections.

Area: Young Economists Session (YES award)

Keywords: industry-level regulation, politics, business

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