Kin in the Game: How Family Ties Help Firms Overcome Campaign Finance Regulation

• In Event: Business Influence around the World

Abstract

Can campaign finance regulation mitigate the political influence of economic actors? We study the effect of a Supreme Court ban on corporate campaign contributions on the contribution behavior of Brazilian public companies. We argue that the ban posed a collective action problem for shareholders to which family ties provided a solution by internalizing the value of political investments. Consistent with this prediction, using a difference-in-differences design and previously untapped data on family ties in Brazilian public companies, we show that, after the ban, hitherto politically active family firms substituted individual for corporate contributions. We probe the notion that family ties transmit influence by documenting the presence of peer effects in the contribution behavior of family members. The results illustrate how social influence within organizations can limit the effectiveness of reforms seeking to curtail political influence and thus contain a cautionary tale for policymakers.

Authors

• Pablo Balan, Tel Aviv University

• Juan Dodyk, Harvard University

• Ignacio Puente