Corporate distress and lobbying: Evidence from the stimulus act

Manuel Adelino, I. Serdar Dinc

Research output: Contribution to journalArticlepeer-review

27 Scopus citations

Abstract

The literature on distressed firms has focused on these firms' investment, capital structure, and labor decisions. This paper investigates a novel aspect of firm behavior in distress: how financial health affects a firm's lobbying and, consequently, its relationship with the government. We exploit the shock to nonfinancial firms during the 2008 financial crisis and the availability of the stimulus package in the first quarter of 2009. We find that firms with weaker financial health, as measured by credit default swap spreads, lobbied more. We also show that the amount spent on lobbying was associated with a greater likelihood of receiving stimulus funds.

Original languageEnglish (US)
Pages (from-to)256-272
Number of pages17
JournalJournal of Financial Economics
Volume114
Issue number2
DOIs
StatePublished - Nov 1 2014
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

Keywords

  • Distress
  • Financial crisis
  • Lobbying
  • Political economy
  • Stimulus

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