How much is the revolving-door worth?


Simon Luechinger and Christoph Moser look at the impact of the government-industry revolving door of presidential appointees, specifically by examining the stock market gains that accrue to the Defense Department appointees’ former employers.

“According to the results, investors clearly expect firms to profit from their political connections. The one- and two-day average cumulative abnormal returns amount to 0.82% and 0.84%. These estimates are not driven by important observations, volatile stocks, or industry-wide developments, and placebo events yield no effects. Effects are larger for top government positions and less anticipated announcements, i.e., announcements for which the actual nominee was not rumoured to be the main candidate.”