Returns from Lobbying

I have always found defenses of political lobbying as something other than a quid pro quo to be a bit perplexing. If the companies aren't getting something of value, why are they spending all that money? A new working paper, Corporate Lobbying and Financial Performance, by Hui Chen at the University of Colorado at Boulder, Vanderbilt's David C. Parsley, and Ya-Wen Yang
of the University of Miami offers some evidence of the benefits of lobbying. The paper drew a short mention in a recent Business Week. Here's the abstract:

Corporate lobbying activities are designed to influence legislators and thus to further corporate goals by encouraging favorable policies and/or outcomes. Using data that became available after the passage of the Lobbying Disclosure Act of 1995, this study evaluates the effectiveness of corporate lobbying from a financial perspective. We find that a firm's lobbying expenses are positively correlated with its accounting-based financial performance. We also demonstrate that lobbying expenses are value-relevant to firms' market valuation. Finally, we use a portfolio approach to compare stock returns of lobbying firms with non-lobbying firms. We find that portfolios of firms with higher lobbying intensities significantly outperform portfolios of firms of similar size and book to market ratios as well as portfolios of firms with zero lobbying spending.