1. Debt in Political Campaigns
- Author
-
Ovtchinnikov, Alexei, Valta, Philip, Ecole des Hautes Etudes Commerciales (HEC Paris), Groupement de Recherche et d'Etudes en Gestion à HEC (GREGH), Ecole des Hautes Etudes Commerciales (HEC Paris)-Centre National de la Recherche Scientifique (CNRS), HEC Paris Research Paper Series, and Haldemann, Antoine
- Subjects
JEL: D - Microeconomics/D.D7 - Analysis of Collective Decision-Making/D.D7.D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior ,JEL: L - Industrial Organization/L.L5 - Regulation and Industrial Policy/L.L5.L51 - Economics of Regulation ,[SHS.GESTION]Humanities and Social Sciences/Business administration ,Political campaigns ,Voting behavior ,[SHS.GESTION] Humanities and Social Sciences/Business administration ,JEL: G - Financial Economics/G.G3 - Corporate Finance and Governance/G.G3.G32 - Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill ,JEL: G - Financial Economics/G.G3 - Corporate Finance and Governance/G.G3.G38 - Government Policy and Regulation ,Debt financing - Abstract
Debt is a significant source of funding of political campaigns, with almost half of all campaigns relying on some form of debt. We analyze the incentives created by this type of debt financing. We show that indebted politicians raise more funds in subsequent elections, especially from special interest groups. Consistent with votes-for-money arrangements, indebted politicians vote for the benefit of those interest groups that help funding their reelection campaigns. The findings support the hypothesis that debt creates distortions, as it forces indebted politicians to take policy positions that are not aligned with the local constituents’ interests.
- Published
- 2016