Mara Faccio & David Parsley: Quantifying cost of influence

Abstract:
Many firms voluntarily incur the costs of attempting to influence politicians. However, estimates of the value of political connections have been made in only a few extreme cases. We propose a new approach to valuing political ties that builds on these previous studies. We consider connected to a politician all companies headquartered in the politician’s home town, and use an event study approach to value these ties at their unexpected termination. Analysis of a large number of sudden deaths from around the world since 1973 reveals a market adjusted 1.7% decline in the value of geographically connected companies. The decline in value is followed by a drop in the rate of growth in sales and access to credit. Our results additionally show a larger effect for family firms, firms with high growth prospects, firms operating in industries over which the politician has jurisdiction, and firms headquartered in highly corrupt countries.

Here’s the original paper from SocialScienceResearchNetwork:

http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID963458_code179428.pdf?abstractid=875808&mirid=2

Bloomber & WSJ picked up this:
“To the extent that politicians favor inefficient (family) firms by allocating resources to them, long-term economic growth will also be reduced,” according to the paper.  In addition, the authors found that politically connected firms “suffer a statistically significant decline in sales growth” and access to credit between the year prior to the sudden death and the year after. 

Health Care Initiative :  “Stock prices should be unpredictable; nobody can predict them,” Parsley said. “Yet we have a model that can predict stock returns.”

… It is possible, based on the results of the study, to stay on top of the obituaries, short some politically connected companies and walk away with a profit.

Roger Warner: Beyond Clint Eastwood – Justice for Hmong tribes

The Hmong are a tribe from the mountains of Laos, in Southeast Asia. They fought for the C.I.A. in a little-known sideshow to the Vietnam war. For a people that didn’t even use the wheel in their old country, the Hmong have done phenomenally well as immigrants to America. A solid Hmong-American middle class – soldiers, lawyers, accountants, chicken farmers, store owners and college students – far outnumbers the urban hoodlums. What haunts Hmong-Americans as an ethnic group is that the war they left behind in Laos has never entirely ended. And what frustrates them is that the U.S. government, while occasionally pretending to care, has made the problem worse instead of solving it.

A third of a century after the U.S. armed forces pulled out of Southeast Asia, Laotian soldiers of the old-line communist regime still hunt and kill men, women, and children belonging to the last few Hmong resistance bands. The leaders of the resistance bands were all trained by the C.I.A. when they were young. Most of them are grandfathers now. They have satellite phones, gifts from their American relatives. From remote jungle mountainsides, they call family members in Minnesota, or Wisconsin, or California, and forlornly ask when the U.S. military is going to come back and save them from their enemies.
Roger Warner is a frequent traveler to Southeast Asia, and is the author of Shooting At The Moon: The Story of America’s Clandestine War in Laos, which won the Overseas Press Club’s book of the year award.

Why America is a bank-owned state

In 2006, the top one per cent of American households’ share of all disposable income amounted to almost a quarter of all households’ disposable income, according to Robert Hunter Wade, professor of political economy at the London School of Economics.

In crude terms, one per cent of the population have a quarter of all the wealth.

Moreover, Wade found the average income of the bottom 90 per cent of the population remained almost stagnant after 1980, although consumption kept rising thanks to the build-up of private debt.

This means that 90 per cent of the American economy were financing their American dream on debt.
Where were the signs that things were going to end disastrously and, worse still, that the most vulnerable might end up paying the heftiest and most disproportionate price than anyone else?

I believe the status quo was allowed to go unquestioned because banks were benefiting obscenely from the interest on our debt, and governments were in cahoots with these banks.

Let’s not forget that governments conveniently moved away from the provision of affordable healthcare, free university education and affordable housing while the banks entered our lives, aggressively, to fill that void.

In addition, I think that this warped and unjust way of operating was not questioned because the electorate was kept in the dark in the most subtle way possible.

The whole issue was made invisible. It was kept off the radar screens of electoral politics.

The American electorate were made accomplice to this because they were convinced that what was good for Wall Street, was good for America as a whole.

It was a political sleight of hand of the highest order. And this explains the bipartisan agreement to the ill-designed deregulation of the finance sector that we have seen over the years.

America has become a bank-owned state.
– Samah El-Shahat, Al Jazeera’s resident economist

Further Samah points to Roubini’s article that this is a Crisis of Solvency not of Liquidity

Cache Misses – more expensive than Mhz?

SPECjbb performance on CMP architectures