Abstract

This study examines the relationship between campaign donations and lobbying, utilizing a comprehensive dataset to track firms' economic and political engagements. I test the hypothesis that firms use electoral campaign financing as an insurance strategy using an event study framework. My results show that firms that did not finance the electoral campaign increased their lobbying expenditures by 47% following the unexpected election of Donald Trump in 2016, in contrast to the non-reactive behavior observed after Obama's 2012 election. Additional analyses confirm the central hypothesis, indicating that firms adjust their lobbying based on electoral outcomes. The study also incorporates a heterogeneity analysis using public procurement data to understand how firm revenue dependencies with the public sector affect the decision to increase lobbying expenditure.