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Political capital: corporate connections and stock investments in the U.S. congress, 2004-2008

Hainmueller, Jens and Eggers, Andrew C. (2014) Political capital: corporate connections and stock investments in the U.S. congress, 2004-2008. Quarterly Journal of Political Science, 9 (2). pp. 169-202. ISSN 1554-0626

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Identification Number: 10.1561/100.00013077

Abstract

Recent research suggests that, public perceptions notwithstanding, members of Congress are rather mediocre investors. Why do the consummate political insiders fail to profit as investors? We consider various explanations that pertain to members' political relationships to public firms. We show that members of Congress invest disproportionately in local firms and campaign contributors, which suggests that overall underperformance cannot be explained by the absence of. political considerations inmembers' portfolio decisions. These connected investments (and particularly local investments) generally outperform members' other investments, which suggests that poor performance is not explained by an excessive political skewinmembers' portfolios. It appears that members of Congress earn poor investing returns primarily because their non-connected investments perform poorly, perhaps due to the usual failings of individual investors; a combination of political and financial considerations may explain why they do not make more extensive use of their political advantages as investors.

Item Type: Article
Official URL: http://www.nowpublishers.com/
Additional Information: © 2014 A. C. Eggers and J. Hainmueller
Divisions: LSE
Subjects: H Social Sciences > HJ Public Finance
J Political Science > JA Political science (General)
JEL classification: G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
Date Deposited: 18 Jul 2014 09:51
Last Modified: 07 Jan 2024 00:33
Funders: Harvard’s Institute for Quantitative Social Science (IQSS)
URI: http://eprints.lse.ac.uk/id/eprint/57734

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