Congressional certification: How firms use former Congress members to lobby on their behalf

Date01 November 2018
Published date01 November 2018
Congressional certification: How firms use former Congress
members to lobby on their behalf
Richard S. Brown
Pennsylvania State UniversityHarrisburg,
Middletown, Pennsylvania, USA
Richard S. Brown, Pennsylvania State
UniversityHarrisburg, 777 W. Harrisburg
Pike, Middletown, PA 17057, USA.
This paper models the effect of firmlevel profitability (earnings before interest and
taxes and return on sales) against certification by former members of the U.S. Con-
gress. Although some scholars have studied certification, none have studied certifica-
tion in the public policy market as is done in the current work. Likewise, although
scholars have studied the effects of lobbying and political connections on firms' out-
comes, none have studied lobbying through former Congress members specifically.
The findings confirm that, after controlling for numerous factors, firms can use former
Congress members to effectively lobby and certify their intentions. Both firmlevel
earnings before interest and taxes and return on sales were significantly associated
with prior lobbying efforts by these former elected federal officials in several different
estimation techniques employed in the study.
In the academic literature, certification is closely linked with firmlevel
reputational effects because the benefits derived from a successful cer-
tification campaign accrue in a similar fashion. As such, certification, as
a construct, has been enveloped into the reputation literature since its
inception because both are attempts to gain legitimacy and approval to
some degree (Petkova, 2016). The main difference, of course, is in the
way that firms try to derive benefits from each. Reputation, in its purest
form, is driven by internal forces and leads to mediumto longterm
intangible benefits (CastroMartinez & Jackson, 2017).
although being somewhat mimetic of reputation, is more contractual.
It is an attempt to have another party signal the quality of the reputa-
tion that is caught in a web of asymmetrical information.
Although the literature on reputation is quite robust, the literature
on certification is actually quite limited. A logical question is, at the
firm level, how is certification effective? Megginson and Weiss
(1991) were one of the first academics to try to answer this question,
and they posited several conditions as a baseline. According to them,
certification is effective when (a) the certifying agent has reputational
capital, (b) the certifying target leases this capital, (c) the agent's repu-
tational capital is at stake, and (d) the value of this atstake capital
exceeds the highest onetime payoff to the agent in the case of
miscertification. The literature on certification has primarily been the
work of finance scholars, who have studied its outcomes in the con-
text of venture capital (VC) and bond issuance, and of management
scholars, who have studied similar outcomes but have focused mainly
on executives' roles in certification. To date, however, there are no
papers that address the issue of certification behaviors of corporations
in the realm of public policy. This paper, in an attempt to address this
gap, models certification by studying firms' lobbying efforts by former
federally elected politicians.
An example of this phenomenon is seen in the 2011 attempted
takeover of TMobile USA by AT&T. During this takeover attempt,
AT&T utilized a multifront lobbying campaign in order to win over
the approval of regulators, many of which were skeptical of the anti-
competitive results that would ensue if it were successful. AT&T hired
a number of lobbyists to negotiate its position, including six former
Congressmen. Although all of the six held influence, two were
extremely powerful senators that had recently left CongressTrent
Lott and John Breaux (Brown, 2017). In addition to their powerful
positions (Lott was the Senate majority leader), they were also from
different political parties, giving AT&T advocacy in both houses of
Congress and both major political parties.
This paper, therefore, contributes to two literature streams
primarily. First, the current research adds empirical results to the rep-
utation and certification literature by estimating the benefits to certifi-
cation in a new and unique context. Second, this work contributes to
the burgeoning field of corporate political activity (CPA) research,
These benefits may include the dampening of negative press or outcomes as
evidence in crisis reputation studies, such as Choi and Lee (2017).
Received: 12 December 2017 Accepted: 26 February 2018
DOI: 10.1002/pa.1711
J Public Affairs. 2018;18:e1711.
© 2018 John Wiley & Sons, 1of8

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