Business and Industry

Why It Is More Blessed to Give: Campaign Contributions

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Michael Brush at MSN's "Money Central" reports on an academic paper that tries to quantify the benefits businesses get from giving to government. Some of the findings, as he reports them:

Corporations that give the most have beaten the market by 2.5 percentage points a year over the past 25 years…….

What is surprising is how much companies get for so little money. The public companies that do give money, on average, fork out just $1,700 to $2,000 per campaign and support an average of 56 federal candidates in each two-year cycle.

……The best approach to giving, for instance, isn't to buy a single lawmaker. Rather, companies that contribute to the largest number of political campaigns get the biggest benefit. "Much like a venture capital portfolio of many startups, a few of the supported candidates will 'pay off big' and result in increases in firm shareholder wealth," says the study, which tracked the impact of more than 1 million corporate campaign contributions by about 2,000 companies from 1979 to 2004.

The study is called "Corporate Political Contributions and Stock Returns," issued in October 2006 by Michael J. Cooper at the University of Utah and Huseyin Gulen and Alexei Ovtchinnikov, both of Virginia Tech. It finds the best-leveraged investments in politicians are to more powerful ones (such as committee heads), to home-state candidates, and to House candidates generally--who are in charge of launching tax and budget law. Also:

Though companies support Republicans more than Democrats ($43,000 per election cycle compared with $31,000, on average), they get a bigger payoff by supporting Democrats. Companies that tilt their contributions to the left, and to home-state candidates, outperform the market by 3 percentage points a year, on average.

Brush's full story here .

Full study about which Brush was reporting here .