Political activities of oil and gas firms in the United States

ABSTRACT

Following recent empirical studies testing the outcomes of firm-level political strategies, this article models the financial performance associated with three specific political actions: (i) political donations, (ii) lobbying, and (iii) political connections. This is done in an industry that consistently ranks near the top in political spending—oil and gas—yet, to date, has not been the focus of such research. The author finds, in a sample of 46 oil and gas service firms over 11 years, that firm-level profitability (earnings before interest and taxes) is associated with prior political efforts. All three explanatory variables were significant in a fixed-effects estimation after controlling for macroeconomic level, industry-level, time-level, and firm-level factors. Additionally, these results were robust to several post hoc tests.

KEYWORDS:

• Corporate political activity
• energy
• lobbying
• oil and gas industry
• political action committees (PACs)
• political connections

Notes

¹ See the Center for Responsive Politics at www.opensecrets.org for the top industries that are politically active. In 2016, only financial services, health, and communications were more active than energy.

² See the Federal Election Commission’s rules at www.fec.gov.

³ Robustness checks included Heckman selection models, robust standard errors, alternative estimation techniques such as feasible generalized least square models, and alternative measurements for the interaction terms (i.e., dichotomous and continuous mixtures). Results were not significantly different than those reported here.