Corporate lobbying and firm performance variability

This paper is the first to provide empirical evidence that higher lobbying expenditures are associated with higher operational performance variability. Using data from S&P1500 firms over the 2000-2020 period, our estimates indicate a positive relationship between lobbying expenditures and the variability of return on asset and return on equity. Addressing the endogeneity concerns by applying a control function approach, we find results consistent with the view that the management of lobbying firms takes riskier investment decisions.