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Research Details

Power, Scrutiny, and Congressmen's Favoritism for Friends' Firms

Abstract

Does higher office always lead to more favoritism? The usual affirmative answer overlooks scrutiny’s role in shaping the pattern of favoritism: It is possible that politicians who attain higher-powered positions under stricter scrutiny may reduce quid-pro-quo favors towards connected firms. Around close Congress elections, we find RDD-based evidence of this adverse effect that a politician’s win reduces his former classmates’ firms stock value by 1.6% after a day and 2.8% after a week. As predicted, this effect varies by cross-state scrutiny, politicians’ power, firms’ size and governance, and connection strength. It diminishes as a politician’s career concern fades over time.

Type

Working Paper

Author(s)

Quoc-Anh Do, Yen-Teik Lee, Bang D. Nguyen, Kieu-Trang Nguyen

Date Published

2021

Citations

Do, Quoc-Anh, Yen-Teik Lee, Bang D. Nguyen, and Kieu-Trang Nguyen. 2021. Power, Scrutiny, and Congressmen's Favoritism for Friends' Firms.

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