This 2018 Bloomberg article claims that "Lobbying Doesn't Help Companies or Their Shareholders".

The numbers instead indicate that lobbying hurts the underlying capital values of the corporations. Lobbying doesn’t increase the chance that favored bills are passed by Congress, and it isn’t associated with the company receiving more government contracts.

It is based on a recent study.

I want to know if this claim is accurate - specifically if lobbying is successful in getting intended bills passed.

I'm looking specifically at the US perspective, as that is what the article is focused on.

  • 4
    Maybe a better question for politics.stackexchange.com? Also, the article is about a study ("The economics of corporate lobbying") that was just published in the Journal of Corporate Finance, so there may not yet be much scholarly response. Apr 11, 2018 at 15:11
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    If you ask on politics, please post a link, I'm interested in the answer
    – Basic
    Apr 11, 2018 at 16:19
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    "benefits" is a loaded term and the paper seems to take a financial view of them. This is problematic. There are bigger benefits than increased profit. And even a narrow financial view will miss the avoidance of catastrophic risks (the actual $ to shareholders don't change from lobbying but the firm avoids legislation that would bankrupt it, there is not apparent return on the lobbying investment except when compared to the counterfactual).
    – matt_black
    Apr 11, 2018 at 20:04
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    Do note that much lobbying on the part of corporations is not done for the benefit of the corporations so much as to advance the political agendas of corporate management. And much business lobbying is performed by industry groups rather than individual companies, and again the agendas pushed are apt to be those of the group's board, rather than stuff that's truly in the interests of the member companies. Apr 12, 2018 at 12:25
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    @RedSonja if humans were a rational species, then no. Then again if humans were rational skeptics wouldn't be required to refute the millions of insane conspiracy theories, Salem would be an unremarkable old town and McCarthy would be just another senator of the past. we would have never had needed to invent the words for the concept of racism or sexism, and we wouldn't have policies which impact the chance of nuclear winter being declared via tweet. Let's just say I don't put high stake in humans as rational beings ;) :P
    – dsollen
    Apr 13, 2018 at 13:35

2 Answers 2


According to the research paper referenced in the linked Bloomberg article, lobbying does benefit companies in certain circumstances. The overall results of the research is that on average companies receive a net loss from their lobbying efforts, however certain companies/situations do receive a net benefit. Large companies lobbying for broad goals do not benefit, whereas small companies lobbying for specific goals do benefit.

Essentially, small and focused companies that have neither the operational complexity nor lack of executive oversight that is inherent in large firms not only have significantly smaller losses on average, but in some cases benefit from the lobbying.

Unfortunately, the paper is behind a paywall. Luckily, my old university credentials still work, so I was able to view the full paper. The paper performs statistical analysis which, even if I fully understood it, could not be adequately examined in a StackExchange answer. So, this answer will just focus on what data was used, and what conclusions were reached.

Data Examined: In the paper's own words:

We obtain lobbying data for the years 1998 to 2016 from the Center for Responsive Politics (CRP). CRP is a non-profit research group that operates out of Washington D.C. and analyzes the effects of lobbying on the legislative process. It maintains a publicly accessible database on lobbying expenditures and campaign contributions at OpenSecrets.org. We also obtain data from CRP on amounts spent by specific firms, lobbying spending on bills presented to the US congress, along with the success (or otherwise) of the bills.


Thus, we start with an initial sample of 21,215 firm-years and data availability constraints reduce it to a final sample of 18,075 firm-years from 2186 unique firms.

So, they examined 18 years worth of publicly available data covering 2,186 firms which have a combined 18,075 years of lobbying effort. I don't know enough about econometrics to know for sure, but this seems like the paper has solid data backing to base conclusions on.

Conclusions: To reach their conclusions, they examined relationships between a large number of variables and performed various econometrics measurements, such as Arellano–Bond estimation, propensity score matched analysis, 2SLS (IV) estimation, and others which I do not have enough statistics degrees to understand but certainly seem thorough.

However, what I can understand are sections from the conclusion:

Lobbying refers to corporate practices designed to influence regulations and public policies... Research has documented high returns on this form of political investments in certain circumstances. Regardless of the outcome of firms' lobbying efforts, the lobbying process itself may also help firms stay informed of regulatory agenda and extend their political ties.

In short, research has shown that in certain circumstance lobbying results in large benefits for the lobbier, and allows corporations to know the details of upcoming regulations so they may prepare for them.

In contrast, other research finds that there are no returns or even negative returns to lobbying. These studies approach lobbying from an agency perspective and posit that managers engage in lobbying to support political causes that they are personally interested in, even though such activities may not benefit the firm and simply serve as another executive perk. Furthermore, inefficient managers may use lobbying to hide their ineptitude behind public subsidies.

In short, other research has shown certain lobbying is not in the company's best interest, rather it is just something the upper executives want to do personally.

Given the conflicting perspectives and inconclusive empirical results in previous research, we reexamine the relationship between lobbying and firm performance while using several rigorous techniques to explicitly control for endogeneity.

In short, this paper wanted to see which research was more correct, using a wide range of techniques.

Second, the finding of a significantly negative association between lobbying and firm performance supports the view that agency costs, through which managers engage in lobbying in order to support private political causes or to mask managerial ineptitude, outweigh strategic benefits of lobbying for an average firm. Our analysis further shows that the negative association may partly be explained by the limited tangible benefits lobbying efforts bring about. Specifically, the amount of lobbying expenses a firm incurs is neither significantly associated with the amount of government contracts awarded, nor with the ratio of bills passed (to the total number of bills lobbied by the firm).


Our results show that the negative relationship between lobbying and firm performance is exacerbated by the operational complexity of a firm. In contrast, for firms with high growth, the association between lobbying and firm performance becomes significantly less negative (or more positive), suggesting that the benefits of policy protection for infant industries can largely offset agency problems that come with lobbying. Taken together, our results highlight the fact that the negative link between lobbying and performance documented in prior results is not universal. Rather, there are specific circumstances when lobbying may be beneficial to firms.

The true overall results of this paper. After accounting for a variety of factors and performing a number of measurements on a large volume of data, the paper concludes that, on average, lobbying represents a net loss for a corporation, and that lobbying is "neither significantly associated with the amount of government contracts awarded, nor with the ratio of bills passed". Essentially, lobbying doesn't help the average company get the contracts or bills they lobby for. However, not all companies receive a net loss from their lobbying.

Addendum: a screenshot from the paper regarding the variables they examined: enter image description here

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    Thank you for your review. So it sounds as if the conclusion was not (entirely) that lobbying failed to get measures passed, but rather that management often was not lobbying for appropriate causes that would actually benefit the company? I am curious though how they were able to prove cause and effect, that companies that were loosing money were doing it due to wasted lobbying as opposed to companies that were loosing money benefited from increased lobbying, but not enough to contract their total loses due to other causes. But I guess that is buried in the complicated statistical analysis?
    – dsollen
    Apr 12, 2018 at 14:20
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    @dsollen: I meant to add a list of the variables they examined but forgot until your comment. They examined things like the power the CEO had in the company, how much the company lobbied, how diversified the company was, etc. The problem with economics is that you can't exactly test whether something is true since you can't have a 'control' company or economy, so they have to rely on complex analysis and estimates. It seems like some estimation techniques create a 'dummy' variable to act as a control.
    – Giter
    Apr 12, 2018 at 14:33

The Bloomberg Article mostly faithfully summarizes the main conclusions of this scientific article, The economics of corporate lobbying. This article concludes that in most cases, lobbying is correlated with poor company performance.

Correlation vs Causation and Bloomberg vs Economists

The Bloomberg headline (as well as many things in the body of the article) make statements of causality like "lobbying hurts the corporations." The scientific article avoids conclusively attributing causality. It says things like "the finding of a significantly negative association between lobbying and firm performance supports the view that agency costs ... outweigh strategic benefits of lobbying...." The economists remember that correlation is not causation. Evidence from the paper suggests that lobbying causes poor corporate performance, however it is still possible that poor corporate performance drives companies to lobby for a solution to their problems.

The science is conflicted

The article was written by real economists, and published in a peer reviewed economic journal. It should be taken seriously as a piece of cutting edge science, but science is messy and cutting edge science can be wrong. I only wholeheartedly believe a scientific theory, when the majority of a large body of research supports it. The introduction to this paper reviews the existing research on the topic, which has shown mixed results.

Prior literature presents only inconclusive evidence on the effect of corporate political activity on firm performance (Faccio, 2006; Goldman et al., 2009; Cooper et al., 2010; Hill et al., 2013; Chen et al., 2015; Ansolabehere et al., 2004; Hadani and Schuler, 2013). When it comes to lobbying, Hill et al. (2013) and Chen et al. (2015) both find a positive link between firm performance and lobbying expenditures. Other research finds either no link (Ansolabehere et al., 2004) or a negative link (Hadani and Schuler, 2013) between corporate lobbying and firm performance.

The paper uses a quote from another paper to explain why the evidence might be conflicting and messy.

The causal relationships between political activity and value likely run in both directions: politics may be one route for a troubled or stumbling firm to pursue to regain profitability, even as politics may distract senior managers and result in business investments that lack focus or are poorly fitted to a firm's core business strategy.

Real answer may be more complicated

Corporations and their lobbying efforts are complex and diverse. This paper concludes that the details of these companies make a difference in whether or not the lobbying is profitable, and the prior research seems to support this view. For example the results of this paper show that larger, more diverse companies tend to have a worse correlation with lobbying. Conversely high growth companies have a less bad (but still negative) correlation. Somehow this complexity didn't make it into the Bloomberg article.

When the real answer is complicated, and scientists don't know which variables are most important, the most important variables may be left out of the analyses. This can lead to conflicting results from different scientists. The paper spent a lot of time and energy controlling for these endogenous variables, but it is hard to tell if they did a good job.

Future science In the future, other economists will rexamine these results and find their own findings. Many of them will cite this paper, and you will be able to find those articles through this google scholar link. Maybe they will have a more clear and consistent take on the evidence.

Conclusion The findings of this article are supported by some previous scientific articles and opposed by others. Economists cant really agree about when and if lobbying is helpful or hurtful to a corporation.

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