Political payoff: campaign giving and stock prices.

WHILE THERE are no solid data proving that campaign contributions directly change politicians' behavior, a new study offers evidence that political giving helps corporations. In a new working paper published by the Social Science Research Network, three business school professors--Michael Cooper of the University of Utah and Huseyin Gulen and Alexei Ovtchinnikov of Virginia Tech--study campaign contributions from corporate political action committees over 25 years. They find that giving a lot to many successful candidates seems to correlate with remarkably lucrative hikes in company's stock values.

In fact, they found the annual return on investment, in terms of increased stock prices for political giving, to be "an absurdly high 654,836 percent." Compared to what their return would otherwise be expected to be, that's an average one-year increase in stock value of $154 million per year. Thousands of firms were involved in the study, with untold numbers of potential legislative actions that might have benefited them, from tariffs on competitors to tax breaks. Thus, the paper has nothing to say about how the giving translates into increased stock value.

The researchers looked only at hard-money contributions, which are limited to $10,000 per candidate in each election cycle. The rate of return seemed excessive to the researchers, who admit it's unlikely the hard money contributions they studied represent the total cost to firms of political involvement. The real cost, they write, could "potentially include other off-the-books contributions or non-money favors, for which only large firms can afford to pay."

One major question that remains unanswered: If political giving is so effective in increasing stock returns, why don't more companies give more, and to more candidates? Hardly any of the giving examined by the study bumped against campaign-law maximums.