PUBLIC attention is inevitably swept up in presidential races—they are loud, ideologically contentious, and drenched in controversy over who might be quietly buying influence from whom. Meanwhile, the smart money may be flowing to where it really matters: the state house. A study by professors at three non-American universities concludes that firms whose directors are linked to winning governors gain significant advantages.
The study's authors say they have been able to quantify the benefits: a 4.1% increase in share price upfront (compared to companies tied to losers), and a 22% increase over three years. Contributing to these gains is a host of goodies: a 5.1% better chance of a state subsidy, 4.4% better chance of a state loan, 5.6% better chance of state tax credits. Other perks exist even if they can’t be so precisely assessed, notably access to bank credit in greater volume and a lower cost.
Evidence is particularly strong in the case of states that have large, heavily-regulated governments (based on academic survey data) and a long history of...Continue reading