The Value of Connections to Dick Cheney

David Fisman, Ray Fisman, Julia Galef, and Rakesh Khurana have a fascinating (I know I overuse this word but it's really deserved here) working paper that tries to estimate the value to a company of a connection to Vice President Dick Cheney. They look at the market reaction (i.e. stock price) of companies connected to Cheney to Cheney's heart attacks, his selection as Vice President, the likelihood war in Iraq at certain points in time, and the probability of a Bush victory in 2000 to see if these events cause the companies to significantly over- or underperform their respective sectors. They find that the value of such ties is zero.They think that this is to some degree generally applicable to individual politicians in the US:

While prior evidence suggests that business-government relations are an important part of U.S. commerce, our results suggest that these connections are more institutional than personal. That is, there are well-organized institutions (such as political action committees and other lobbying entities) for facilitating these relations that differ from the deeply personalized favor exchange that characterize business-politics relations in so much of the world.

I think that this result needs much further study but the implication that the value to a company of a personal connection to a politician is relatively unimportant compared to more formal and broad lobbying and PACs is going to be hugely important in figuring how to best fight corruption and the influence of special interests.

Update: Here's another similar paper Estimating the Value of Political Connections by Ray Fisman on how news about former Indonesian President Suharto's impacted companies with connections to him. I remember reading this about two years ago but don't remember for which class...