Matthew D. Hill

Determinants and Effects of Corporate Lobbying

We examine the determinants and value effects of corporate lobbying, controlling for corporate PAC campaign contributions. We find evidence that firms with greater potential payoffs from favorable policy and regulations lobby most actively, and that managers often utilize both lobbying and campaign contribution channels to influence the political climate affecting the firm. We also find that shareholders value the lobbying activities pursued by management on their behalf, particularly if the firm does not have a PAC that contributed to an election campaign. The results are robust to a number of tests designed to mitigate potential omitted-variable and self-selection bias.

Corporate Cash Holdings and Political Connections

We examine the relation between corporate liquidity and political connections measured via lobbying expenditures. This is an interesting question as many of the motives for holding cash should be diminished by political connections. Results indicate a significant and inverse relation between cash levels and lobby expenses and that the marginal value of cash decreases with lobbying. Taken together, these findings suggest firms react optimally to the reduced benefits of cash linked to political connections and that the market recognizes the weakened benefits of cash. Overall, our research shows another way political connections can shape corporate policy.

Downstream Value of Upstream Finance

We examine market value implications of managing liquidity via supplier financing. Results suggest a direct link between shareholder wealth and use of trade credit, and the relation exhibits significant cross-sectional variation. In particular, the market value of trade credit varies with the liquidity of goods sold and competition in product markets. Evidence also indicates the value-supplier financing association strengthens with financial constraint, which supports the financing motive for trade credit. Further findings are consistent with the transaction cost motive. Overall, we conclude that shareholders value the strategic benefits associated with supplier financing and that downstream firms’ characteristics influence this value.

REITs and market friction

We examine the Hou and Moskowitz (2005) parsimonious measure of friction, which proxies investors’ difficulty in incorporating market-wide information into security prices. Our comparison of REITs and matched non-REIT stocks shows a statistical and economically higher level of friction for REIT securities. This finding suggests that REIT securities react more slowly to new information. Thus, our evidence does not support the view that REITs are more transparent than non-REITs, at least with respect to price delay. Further results indicate that the primary drivers for the REIT-delay differential include differences in size, turnover, volatility, and price level. Examining within-REIT differences in delay, we find a positive and significant relation between delay and whether the REIT is part of an operating partnership. We find only marginal differences in delay across property focus.

Trade Credit or Financial Credit? An International Study of the Choice and Its Influences

ABSTRACT Trade credit financing has usually been assumed to be an expensive source of funds. Recent studies, however, suggested that it can be available at either low or no cost. Using an international panel of firms, we provide an empirical answer to this matter. We analyze the type of firms and financial environments that are associated with a relatively more intense use of financial credit and, consistent with the mainstream literature, we find that trade credit financing is chosen by firms that have more restricted access to financial credit. These results appear to be stronger for firms located in emerging markets.