Executives in Politics

We study the involvement of corporate executives in U.S. politics over the last 40 years. First, we document that the share of business politicians in federal elected office increased from 13.3% in 1980% to 22.6% in 2018, with most of the increase occurring over the last two decades. Second, we find that business politicians enjoy an early fundraising advantage over their opponents, both because they are more likely to self-fund their campaigns and because they receive more campaign contributions from their firms. Third, the election of business politicians benefits their industries and firms, which experience positive abnormal stock returns when their executives win political office. We also show that business politicians, once elected, vote for policies that shift the balance of power toward corporate interests. Using close elections for identification, we show that this policy shift cannot be attributed solely to the changes in the underlying preferences of the electorate. Overall, our results indicate that corporate executives have become more involved in U.S. politics and that this involvement has benefited business interests and affected aggregate legislative outcomes. This paper was accepted by Gustavo Manso, finance. Funding: The authors thank the Digital Age Management Research Area at the China Europe International Business School (CEIBS) and Centre for Applied Research on International Markets, Banking, Finance and Regulation (BAFFI CAREFIN) at Bocconi University for financial support. The Area and the Center played no role in study design, data collection and analysis, or preparation of the manuscript. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.4595 .