Corporate governance and lobbying strategies

The paper extends the recent research on corporate non-market actions (Fernández & Usero, 2010, and Usero & Fernández, 2009). Specifically, we study whether corporate governance, in terms of managerial entrenchment, determines the choice and degree of lobbying engagements as a non-market strategy and with what impact on firm value. The results indicate that firms with more entrenched management have a greater tendency to engage in lobbying activities. Within the group of firms that lobby, there is a negative relation between the degree to which management is entrenched and lobbying intensity. In addition, there is a positive relation between lobbying intensity and value added by lobbying firms. Overall, the evidence suggests that corporate lobbying is not agency driven and may, in fact, create value.