Journal of Undergraduate Research
Volume 6, Issue 8 - July/August 2005

Publicly Traded Companies and Political Donations:
Do Corporate Campaign Contributions Enhance Shareholder Wealth?

Marvin McTaw

ABSTRACT

This paper analyzes the relationship between donations given to political parties and candidates (i.e. Republicans and Democrats), and the stock returns of corporations who make the donations, in an attempt to determine the value created for shareholders through political donations. Using daily stock returns, S&P 500 returns, and Iowa Electronic Markets data (A futures market whose contract prices are determined by political outcomes), multiple regression analysis and correlation studies were performed. All studies come to the same conclusion: there is no statistical evidence that suggests shareholders receive any returns from political support. Implications, including the possibility that political donations are simply the reflection of management are discussed. Analysis is also performed on who gives, why firms give, determinants of the levels of giving, and the costs and benefits of giving.

INTRODUCTION

The purpose of this paper is to test the hypothesis that benefits, in the form of increased market value of shares, are created for shareholders from the financial support of political parties and candidates. This hypothesis comes from the application of a concept introduced by Hertzel, Martin and Meschke (HMM) in their paper Corporate Soft Money Donations and Firm Performance. They state, “Managers of publicly traded corporations are to invest in tangible and intangible assets to increase the wealth of their shareholders (1), ” and that one such intangible is political influence. If this is true, one would expect firms to create additional value for shareholders from political donations.

Since markets are expected to be reasonably efficient, they generally reflect all publicly available information. If this is the case, and a company supports one party, which is expected to win (or lose) an election (e.g. Congressional, Presidential, etc.), it is reasonable to believe that the firm’s equity value should accrue some additional benefits from supporting the victorious party. In other words, the market should recognize the firm’s ‘investment’ in political influence and discount back (i.e., find the present value of) any additional benefits that could result from the firm’s support.

Such excess returns are important to understand because of the implications. Perhaps the most important implication is that if this belief is true, then managers clearly have a fiduciary duty to shareholders to invest as much as possible in political relationships as long as there is a sufficient return. This means firms should not ‘waste’ their donations on non-profitable ventures (i.e. candidates and parties) with which they believe they can accomplish nothing. This also means that one would expect companies to invest more and greater amounts in profitable ventures. The effects on politicians are clear. If a firm views your relationship as beneficial to them, they will continue to support you and in ever-greater amounts. If the relationship is not beneficial, then the company will end the venture and salvage as much as they can from it before moving on to a more profitable venture (e.g. another politician, primary- or general-election candidate, etc.).

With this in mind, it becomes apparent that shareholders should be aware of the ‘political premium’ (the financial benefits gained from political donations) their equity could earn in the event of a successful election for the party their firm supports. To determine whether a premium exists and how much this premium is worth to shareholders, a study was performed using various data resources, including daily stock and S&P 500 returns from the Center for Research on Security Prices (CRSP), and the Iowa Electronic Markets (IEM) (a futures market where contract prices are determined by political outcomes). Analysis of this data supports the conclusion that corporate campaign contributions have little, if any, impact on the return to shareholders.

The study will be accomplished as such: Section II will give background on the issue of corporate campaign contributions and will expand on issues such as who gives, why they give, costs and benefits, and whether personal preferences of managers affect giving behavior. Section III will describe the data used in the study, Section IV will discuss the methodologies employed and the results, Section V discusses implications, and Section VI will summarize the information, conclude the study, and provide guidance for future studies.

BACKGROUND

Corporations make political donations in a variety of ways. These include political action committee (PAC) funds, “soft-money” (legal until 2002), “hard-money ” (2), and bundled funds(3) that are given to candidates raising funds. The fund-raising process occurs year round and is not just during ‘election season’: for example, US Congressmen usually begin raising funds for their re-election as soon as they obtain office. Politicians generally appreciate corporate donations because they help them either gain office or maintain their current position. Additionally, in the case of incumbents, these campaign funds pose formidable barriers against competition. Such resources act as a hurdle because they can provide for a wide range of products and services. These include marketing materials (e.g. television ads, direct mail, targeted phone calls), polling, and get-out-the vote efforts. Such products and services are crucial in determining election outcomes and give incumbents a considerable advantage over their opposition.

Although politicians undoubtedly appreciated such donations, critics question the ethics and reasoning behind the giving. Many continue to view the vast amounts of money going into political coffers by large corporations as payment for services rendered and/or future favors. An often-cited example comes from the now defunct Enron.: Enron donated over $6.5 million between 1989 and 2004 and in the 2000 election cycle the vast majority of its donations went to Republicans (4). Several critics viewed the appointment of several current and former Enron employees to important positions within the energy industry, the deregulation of certain markets, and counsel in legislative formation, as clear evidence that political influence was being bought (5). Such behavior, coupled with the cost of the 2000 election (over a billion dollars [6]), led to a call for change.

With the passage of the 2002 Bipartisan Campaign Reform Act, “soft-money” (unlimited campaign contributions to political parties) was banned and several other laws (e.g. new contribution limits, advertising regulations, etc.) were put into place with the goal of significantly reducing the amount of “corporate” money and influence in elections (7). It is clear from the enactment of these laws that many believed the structure of campaign finance unfairly favored corporations, that politicians were beholden to ‘special interests’, and that this was unacceptable (8). Although this was generally believed, it had not been proved.

Who Gives?

327 of the 500 firms that make up the S&P 500 gave donations to politicians directly through their PAC in the last election cycle, and probably even more gave when individual executives are accounted for (9). The number may increase when you take into account that some firms make their political donations through industry groups that represent firms in a particular industry (10). These firms are in every industry and have a broad range in size (e.g. employees, revenues, etc.). Even though donors come from a broad range of industries, as shown in Table 1 the largest givers tend to be in highly regulated industries (11). For example, financial services firms (e.g. commercial and investment banks, insurance companies, etc.) are highly regulated. The rules that govern their industry have a direct and sizeable impact on market opportunities available to the firms, costs the firms have to pay, revenue opportunities, and the overall profitability of the firms. Additionally, policies the government pursues have a substantial impact on the economic environment firms in the industry might encounter. For example, if the government decides to run massive deficits causing interest rates to rise, this would clearly have an impact on the financial services industry. As a result, 14 of the top 100 political donors are financial services firms. If one were to consider only corporations in the top 100, these firms make up 37.8% of the firms.

Other highly regulated industries that tend to give include the tobacco, energy, pharmaceutical, defense, entertainment, communications, and transportation industries.

Why Give?

Corporations tend to give for several reasons but the biggest reason is quite clear: a desire to influence matters that are important to the firm or to the firm’s managers (12). For example, when deregulation took place in certain sub sectors of the energy industry, firms believing deregulation to be in their best interest significantly increased the amounts donated to politicians. Additionally, they also increased their lobbying spending to provide additional pressure on politicians to do the things that they proposed (13). Political influence can take several forms. Two of the most common ways are through policy formation, including favorable writing of laws, and agenda setting (14).

When writing policy there are several things that must be considered including the overall goal of the law, the effect the law will have on both direct and indirect parties, and the winners and losers created as a result of the policies. When laws are written, corporations want to be on the winning side and they can accomplish this by influencing the language and details within legislation. This is accomplished mainly through the relationships that are established by, and reinforced through, campaign contributions (15). When sizeable donations are made, many candidates/politicians are known to take one-on-one meetings with large donors to listen to their concerns (16) . During this time, one can expect corporate representatives (e.g. CEO’s, lobbyist, etc.) to voice their concerns and preferences on specific items of interest. In fact many have been known to even offer suggestions or guidelines for how the laws should be written or applied (17). The theory of ‘investing’ in the political process leads one to believe that if politicians do an acceptable job in forming policies and/or legislation favorable to firms, then the politicians can expect future support. If they are unsuccessful, support may be diminished or passed on to an opponent in a future election.

Agenda setting is another important way in which corporations wish to have influence. Agenda setting is the ability to have issues important to the firms become a focus of public debate. For example, some argue that the current Bush Administration’s emphasis on an Energy bill and the President making it one of his priorities, is simply a reflection of his ties and duties to the energy industry (18). Agenda setting is also important because there are issues that many corporations would prefer not to be part of the public debate; actions that they would rather accomplish under the radar. By having an impact on topics that are and are not discussed in public, firms are better able to address their needs. If they believe public sentiment is on their side, they try to get things out in public debate. If public sentiment is against them, they try to have things done quietly.

Some studies suggest that political donations don’t change politicians, but are simply a reflection of a politician’s already stated interests (19). For example, if a politician’s stance on trade was protectionism (e.g. high tariffs, quotas, and other non-tariff barriers), and if a firm saw this viewpoint as being in their best interest, they typically would support the candidate.

Regardless of the type of influence exerted, firms give because they wish to have some control over situations that could be either beneficial or detrimental to the firm’s success. They have influence because even though politicians are supposed to represent the interests of the their constituents, they are much more likely to listen to the concerns of their large donors, the ones who help them attain and maintain their position.

What Determines The Amount Given?

There is no one particular formula that determines how much money corporations will donate to politicians, however, several general guidelines can be established. The first thing that should be considered is the size of the firm. This is important because company PAC funds are raised from employees of the firm. As a result, larger firms typically have more funds to donate through their PAC. Additionally, larger firms tend to have more people who can make larger personal donations. For example, a firm with 100,000 people typically will have a larger number of employees who can max out personal donations to candidates than a firm with 100 employees. When coupled with the greater availability of PAC funds, larger firms generally contribute more.

Another important consideration is the firm’s industry. As previously stated, highly regulated industries tend to have higher levels of political donations. Firms in these industries tend to give more because, by obtaining influence, they hope to consistently improve the regulatory environment in which they operate. Additionally, the impact on these firms tends to be much more noticeable than in other areas, such as consumer goods.

Perceptions of what is at stake also tend to drive the amounts given. Generally speaking, if a firm believes more is at stake, they typically will donate more funds. For example, if a firm is in the pharmaceutical industry and believes substantial changes in patent law will take place in the next legislative session, it is more likely to donate to the candidate who will support a position most favorable to the firm.

The length of a relationship is also important when determining how much to give. It can be expected that the longer there has been an established relationship, the greater the likelihood of a larger sum being donated.

Another important factor is the importance of the politician. Politicians in leadership positions, like the President, Majority Leader, or Chairman, tend to receive more and larger donations. Additionally, politicians who have more power over the issue areas of importance to the firm tend to receive larger amounts and more donations in general: chairmen of relevant committees tend to receive more campaign contributions than non-chairmen. If a firm is donating to these politicians, they would tend to give larger amounts and the donations would tend to be more frequent.

There are several other factors that affect the amount given. These include the party of the politician (20), the politician’s constituency (21), prior personal relations (22), and legal limits to donations (23).

Costs vs. Benefits

Firms are banned from directly contributing to political campaigns. Instead, they usually exert their influence through Company PAC’s, as well as individual donations. Company PAC’s must submit statements to the Federal Election Committee noting every donation they make. When this amount is added to individual contributions and lobbying costs, an estimate is derived for the cost to companies for political involvement. However, it must be made very clear that other than lobbying, there are no direct costs to the firm: individuals contribute their own money to candidates and the PAC and, therefore, it is not a direct company expense. Secondly, even if PAC donations were a direct expense of the firm, they would be nominal when compared to other expenses. For example, in the 2002 election cycle, the Altria Group donated over $4 million from its PAC, management, and employees (24). While this might seem large in absolute terms, for a company that at the time had over $80 billion in revenues, and $11 billion in profit (25), this represents a paltry sum.

When these costs are compared to the potential benefits, it is clear that political donations can provide for substantial returns and, therefore, it is probably in the best interest of firms to make political donations. By making donations, firms at the very least have an open ear and sometimes one-on-one time to make their case. If they don’t make donations they lose this ability to have a direct line and, in a sense, leave completely to chance changes in policy that could significantly affect the firm.

Personal Interests vs. Corporate Interests

Most companies have given overwhelmingly to Republicans (see Table 2). This is because the GOP is generally viewed as the pro-business party. Even though this is the case, the question arises as to whether or not political donations are a reflection of the personal preferences of managers and, if so, are they in the best interest of shareholders. This question arises because the firm’s management determines the recipients of PAC donations, as well as how much will be donated.

HMM note in their paper that there are three groups that potentially benefit from political donations: politicians, managers, and shareholders. Much study has been done on the effects of donations for politicians (26). There is only a small literature that explores the impact of political donations on managers and shareholders. One study by Gupta and Swenson, which studied the effects of a major tax law change in 1984, found that a firm’s PAC contributions, and individual manager’s campaign contributions, were both positively correlated with the tax benefits at stake for the firm (27). In other words, PAC and personal donations by management seem to support the assertion that managers’ actions are aligned with shareholder interests.

There are still critics who point to examples of managers supporting a candidate for social issues that are irrelevant to the overall success of the firm. However such occurrences seem to be the exception not the norm, and on the aggregate it seems firms typically do make donations to address their interests or to support those whom have a vested interest in the industry (e.g. former executives). In fact, when Republicans took control of the house in 1994, and later on the Senate, donations shifted heavily to the GOP (28). This supports the assertion that large corporations are pragmatic donors and give when and where necessary (29).

DATA AND VARIABLE DEFINITIONS

Data

In a perfect world, it would be ideal to obtain a corporate PAC’s list of donations, management’s donations, their political affiliations, and all employee donations, and then analyze this data in relation to polling data of the relative strength of the two major political parties. In reality, this is not practical because such information is not easily found. For example, all donors to campaigns must list their job title and corporate affiliations, however, they rarely do so, usually only listing their general occupation (30). Additionally, polling information is not typically released on a daily basis and normally only tracks one candidate against another, not the relative strength of one party over the other. To address these shortcomings, we have used several proxies in an attempt to answer whether corporate campaign contributions enhance shareholder wealth.

Donations to political parties are often difficult to track, however, they can normally be found via tracking through the Federal Election Commission (FEC). The data provided from the FEC is very difficult to decipher, but several interest groups have simplified the data into much more user-friendly versions. Perhaps the most well know is the Center for Responsive Politics (CRP). The CRP maintains extensive databases on political donations, including profiles and background information on donors, the recipients of funds, the type of funds donated (e.g. PAC funds, “soft-money”, “hard-money”, bundled funds, etc.), and aggregate totals. The CRP also maintains a listing of the top 100 donors since its inception in 1989. Thirty-seven of the top 100 donors are members of the S&P 500. These firms will make up our sample group: Table 2 lists the 37 firms, their ticker symbol, the total amount donated, and the percentage given to each party.

The S&P 500 is a market-capitalization (number of shares outstanding times the share price) -weighted index that tracks the performance of the 500 largest US firms. This index provides a broad overview of US market conditions because it encompasses several broad sectors. Since our sample contains firms from many different sectors (e.g. agriculture, consumer products, energy, financial services, etc.) the S&P will provide a good proxy for the market. Returns for the S&P 500 were retrieved using the Center For Research In Security Prices (CRSP). Stock data including, raw return, beta-excess return and holding period return for the 37 companies was retrieved using the same service.

Since it is extremely difficult to find daily polling data from the major pollsters (e.g. Zogby, Gallup, CNN, etc.) the Iowa Electronic Markets (IEM) have been used instead. The IEM are a “…small-scale, real-money futures markets where contract payoffs depend [on] political events such as elections. (31)” Using the IEM, participants can trade "shares" of political candidates or parties with the final return dependent upon the outcome of the election. Markets include a “winner-takes-all” and “vote-share” market. The main difference between these two markets is the winner takes all market tries to predict the ultimate winner in an election while a “vote share” market predicts the percentage of votes each candidate will receive. The IEM is extremely effective at predicting outcomes, especially in the case of the vote share market in which there is an average error of only 1.3% (32).

Historical daily closing prices from the 2000 presidential, winner-takes-all market will be used for the analysis. This provides 137 observations per contract. These contracts reflect the IEM market sentiment as to which candidate will win the Presidential election. The Presidential election was used because this branch of government has the most influence in agenda setting and policy formation, arguably two of the most important areas for corporations.

Variable Definitions

R = ( P_t - P_t-1 )/ P_t-1

For this analysis, we define the following variables: return, R, is calculated as today’s price (P_t) minus the prior day’s price (P_t-1), divided by the prior day’s price (P_t-1). This is the calculated return for all companies, the S&P 500, and the IEM data. The returns for all firms and the S&P 500 do not assume the reinvestment of dividends.

METHODOLOGY AND RESULTS

According to the CRP, the top 100 donors have given over $1 billion in federal election campaigns from 1989 to October 2004. The 37 companies we track have given over $417 million. The top 100 donors give slightly more money to Democrats than to Republicans due to the presence of several large unions. Although Democrats hold a slight lead in funds from the top 100 donors, this began to change when Republicans won control of the house in 1994 and later on gained control of the Senate (33). Large corporations, such as the ones tracked in our sample, have shown a sort of pragmatism in their giving and have shifted much of their donations to Republicans (34). The trend has also seen large increases in the absolute amount corporations donate. As a result (see Table 2), 28 of the 37 companies in the sample have given over half of their donations to Republicans.

Many factors affect the price of a stock. In order to determine the effects of political affiliation with respect to returns, we calculate return to be:

R = α + Β1(S&P500) + Β2(IEM) + η

Where α = intercept of the returns, Β1 = beta of the stock to the S&P 500 index, Β2 = beta of the stock in relation to the Iowa Electronic Market data, and η = error adjustment. By determining b2, we are able to see the effects of the firm’s affiliation to either political party. In determining the effects on company stock we have accounted for the effects of the market in order to isolate the effects from outside factors. One would expect companies who donate a majority of funds to Republicans to have a positive Β2 when regressed against Republican IEM contracts. This would lead to better returns when there are increases in contract prices for Republicans and decreases in contract prices for Democrats. However, since this formula is related to the capital asset pricing model (CAPM), it suffers from some of the same limitations as the original formula.

The sample for this experiment consists of the 37 publicly traded companies that are named in the CRP 100 top all-time donors list. After finding the daily company returns for the same 137 periods covered by the Iowa election markets, they were regressed using the formula above. Tables 3 and 4 show Β2 when this process is undertaken for each contract. The data is not consistent with the hypothesis that a firm should have a positive Β2 when regressed against the contract for the party which it donates more money to (35).

Following these regressions, portfolios were formed dependent upon companies percentages donated to the political parties. Four portfolios were formed: Strong Democrats (SD), Strong Republicans (SR), Weak Democrats (WD) and Weak Republicans (WR). “Strong” portfolios are companies that have given over 60% of their overall donations to either Democrats or Republicans, while “Weak” portfolio members give 50-60% of their donations to a party. Assuming all stocks were weighted equally, a portfolio return was derived and then regressed against the S&P 500, and IEM contract prices for both parties. Table 5 summarizes the Β2 for these portfolios. This analysis produced only one statistically significant and interesting result: Weak Republicans react negatively to improvements of Republicans in the IEM. If this were the case, why then would managers continue to support the party in question? One hypothesis is that corporate donations reflect the political preferences of management.

The third analysis involves correlating portfolio returns to IEM contact returns. This would determine the direction and strength of relationship, if any, between the returns of the members of the portfolio and the returns on the IEM contract. One would expect there to be a strong positive correlation between the returns for firms strongly supporting one party and the returns on the IEM contract (36). This however is not the case. Table 6 summarizes the correlation data and shows that all portfolios have a negative correlation to the Republican winner-takes-all contract in the IEM. This too would support the hypothesis that donations from corporations reflect the political preferences of managers and are not necessarily “investments” for the firm.

ANALYSIS OF RESULTS AND IMPLICATIONS

The results of this study seem to suggest that shareholders receive no additional monetary benefits from a firm’s support of one political party or the other. This is of great significance because if shareholders receive no additional benefit, then companies should refrain from making political donations. There are several possible reasons why there appears to be no additional financial benefit that shareholders gain from political support. The most likely reason is that it is difficult to estimate the economic benefits that firms will receive from their support of political parties. As a result, investors and traders find it difficult to discount these benefits and, therefore, political outcomes have no material impact on the price per share.

Of particular interest is the correlation data. This data reveals that all firms have a slight negative correlation to Republican contracts. In other words this data suggests that when markets believe republicans will win the election, all security prices, regardless of which party the company supports, goes down. This is interesting because the majority of corporate campaign contributions go to Republicans. Given this, one would expect there to be at least a slight positive correlation between the Republican IEM contracts and the SR and WR portfolios, but this clearly is not the case. In other words, even though there is a converse relationship with returns to shareholders and the general belief that Republicans will win the election, managers continue to ‘invest’ in Republicans to the detriment of shareholders. This study would support the hypothesis that political donations are a reflection of the personal preferences of management, and are not necessarily in the best interest of shareholders.

Another implication of this study is that the market might not properly adjust for political risk. In other words, the markets might not be efficient when it comes to addressing the impact political environments can have on businesses.

CONCLUSION

In this study we investigated the question whether corporate campaign contributions enhance shareholder wealth, under the assumption provided by HMM that these donations are like investments and that managers expect a positive payoff in the future. In order to accomplish this, we performed multiple regressions and correlation studies of the top 37 corporate donors over the past 15 years with data from CRSP and from the Iowa Elections Market, a futures market that allows traders to buy shares in political outcomes.

While the conclusion is not completely clear, the evidence seems to indicate that corporate campaign contributions are not necessarily considered investments for the firm by the market. The statistically insignificant outcomes, general trends, and correlation studies all seem to say the same thing: corporate campaign contributions do not serve to enhance the shareholder wealth and could potentially reflect the personal preferences of the management of the firm.

With this knowledge, the analyses performed in this study are of high importance to investors as they should be interested in whether these donations are actually useful investments for the firm. Further analysis could be performed using industry specific indexes. Additionally, the study could be expanded to include all members of the S&P 500 to determine whether the statement holds true for all publicly traded firms who make political donations.

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REFERENCES

1. Hertzel, M; Martin, J and Meschke J. (2002). Corporate Soft Money Donations and Firm Performance. Arizona State University (Google Scholar) 1-24 Back
   
2. These are funds donated directly to candidates from individuals. This contribution limit was raised to $2000 in 2002. Back
   
3. Bundled funds are donations where fundraisers will gather the donations of multiple donors and send them in to candidates and parties at one time. Bundled funds are known to be as high as $100,000 or more (CRP). Back
   
4. Center For Responsive Politics, Top All Time Donor Profiles, http://www.opensecrets.org/orgs/list.asp?order=A Back
   
5. Weisskopf, Michael. “Enron’s Democrat Pals” Time; 8/26/2002, Vol. 160 Issue 9, p20, 1/2p, 1c Back
   
6. Center For Responsive Politics, http://www.opensecrets.org/bigpicture/index.asp Back
   
7. Dionne Jr., E. J., MONEY & ELECTIONS, Commonweal, 4/9/2004, Vol. 131 Issue 7, p8, 1p Back
   
8. Hertzel, M; Martin, J and Meschke J. (2002). Back
   
9. Center For Responsive Politics, Political Action Committees, http://www.opensecrets.org/pacs/index.asp Back
   
10. For example, some industry groups such as the American Bankers Association (ABA) count as members financial services firms. The ABA receives its funding from these institutions and makes donations as a industry representative. When such groups are considered, the number of donating firms probably increases considerably. Back
    
11. Center For Responsive Politics, Top Industries Through The Years, http://www.opensecrets.org/pubs/whospay00/industrychange.asp Back
    
12. Hertzel, M; Martin, J and Meschke J. (2002). Back
    
13. Weisskopf, Michael. “Enron’s Democrat Pals” Time; 8/26/2002, Vol. 160 Issue 9, p20, 1/2p, 1c Back
    
14. Hertzel, M; Martin, J and Meschke J. (2002). Back
    
15. Center For Responsive Politics, “Cashing In: A Guide to Money, Votes, and Public Policy in the 104thCongress”, http://www.opensecrets.org/pubs/cashingin_104th/04intro.html Back
    
16. Not ducking , Economist, 00130613, 3/27/2004, Vol. 370, Issue 8368 Back
    
17. Ibid. Back
    
18. Ibid. Back
    
19. Magee, C. (2000). Do Political Action Committee’s Give Money To Candidates For Electoral or Influence Motives? Public Choice 11:372-399 Back
    
20. Republicans are generally viewed as more business friendly and as a result generally receives more and larger donations from corporations. Back
    
21. The state that the politician represents can have a huge impact on the sources and levels of political donations. For example, politicians from Texas generally have backing from energy and energy services firms native to the state. Back
    
22. A great example of this comes from former Goldman Sachs Chairman and current New Jersey Senator, John Corzine. When running for the US Senate, the firm raised millions of dollars internally to support his candidacy and continues to support his campaigns financially. Generally speaking, if politicians have corporate ties (e.g. a former executive of a firm, one could expect a larger amount of donations. Back
    
23. Multi-candidate PAC’s can give $5000 to individual candidates, $15,000 to national parties, and $5000 to any other PACS or state parties (Center For Responsive Politics. “Federal Campaign Finance Law: Contribution Limits” http://www.opensecrets.org/basics/law/index.asp Back
    
24. Center For Responsive Politics, Altria Group Donor Profile http://www.opensecrets.org/orgs/summary.asp?ID=D000000067&Name=Altria+Group Back
    
25. Annual Report. Income Statement, http://finance.yahoo.com/q/is?s=MO&annual Back
    
26. Hertzel, M; Martin, J and Meschke J. (2002). Back
    
27. Ibid. Back
    
28. The Center For Responsive Politics www.opensecrets.org Back
    
29. Ibid. Back
    
30. Hertzel, M; Martin, J and Meschke J. (2002). Back
    
31. “What Is the IEM?” http://www.biz.uiowa.edu/iem/media/summary.html Back
    
32. Ibid. Back
    
33. The Center For Responsive Politics, www.opensecrets.org Back
    
34. Ibid. Back
    
35. If Company A donates 65% to Republicans, when regressed against the Republican contract in the IEM, one would expect it to have a positive Β2. Back
    
36. For example, one would expect returns on the Strong Democrats portfolio to have a strong positive correlation with the returns on the IEM winner-takes-all Democrat contract. Back

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