CAMPAIGN FINANCE REGULATIONS AND THE RETURN ON INVESTMENT FROM CAMPAIGN CONTRIBUTIONS

Being good liberal Democrats, we began this study with the belief that corporations use their campaign contributions to shape public policy and that donors substantially benefit from their campaign contributions. Stock markets should reflect the high returns that firms enjoy from their political strategies, and changes in campaign finance laws ought to alter the stock prices of firms that give heavily to politics. That, however, is not the assessment of investors – those who value firms and the environment in which they operate. We identified dates of key campaign finance regulatory decisions and measured changes in stock prices of firms affected by those decisions. These decisions immediately affected hundreds of millions of dollars of corporate giving, but they have no apparent effect on the markets valuation of the long-term profitability of firms. This conclusion suggests that the fundamental critique of campaign finance in America – that donations come with a quid pro quo and extract very high returns for donors – is almost surely wrong. 1 Campaign Finance Regulations and the Return on Investment from Contributions The United States regulates campaign contributions from firms, individuals, and voluntar