Belarusian Economic Research and Outreach Center

Open seminar with Ilona Babenko

Open seminar of Ilona Babenko (W.P. Carey School of Business, Arizona State University) took place on the 25th of July at IPM Business School, where she presented her work-in-progress “Executives in Politics" co-authored with Viktar Fedaseyeu (Department of Finance, Bocconi University) and  Song Zhang (Carroll School of Management, Boston College).

ABSTRACT

The share of politicians in the U.S. Congress with prior executive experience increased from 12.8% in 2000 to 21.2% in 2014. Firms whose executives win federal elections experience significant positive abnormal stock returns around the dates of elections as well as around the dates of legislation passage, if such legislation is introduced by these firms’ executives. Further, firms whose executive holds elective office also receive significantly more government contracts during the executive’s tenure in political office. By examining the voting records, we find that, relative to politicians without prior executive experience, businessman politicians are significantly more likely to vote for legislation supported by pro-business interest groups and are less likely to vote for legislation supported by labor unions. Our results suggest higher potential benefits from political participation for firms might have induced more executives to seek political office.