Power, Scrutiny, and Congressmen's Favoritism for Friends' Firms
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 nd RDD-based evidence of this adverse effect that a politician's win reduces his former classmates' firms stock value by 1.9% after a day and 3.2% after a week. As predicted, this effect varies by cross-state level of scrutiny, politician's power, firm size and governance, and connection strength. It diminishes as a politician's career concern fades over time.
Quoc-Anh Do, Yen-Teik Lee, Bang D. Nguyen, Kieu-Trang Nguyen
Do, Quoc-Anh, Yen-Teik Lee, Bang D. Nguyen, and Kieu-Trang Nguyen. 2023. Power, Scrutiny, and Congressmen's Favoritism for Friends' Firms.LINK