Abstract

Motivated by increasing revolving door accuations faced by the SEC rulemakers, I compile novel datasets to investigate the prevalence of revolving door practices among SEC rulemakers and quantify its impact on rulemaking. I find that 31% of the rulemakers join the regulated industry after their SEC tenure ("revolvers"). Rules drafted by revolvers are equally likely to be adopted but, conditional on adoption, less likely to be challenged by the industry. Further tests suggest that this lower likelihood of legal challenge reflects more industry-favoring rulemaking rather than more legally sound rules. Revolvers tilt rules toward industry preferences and away from the changes requested by academic commenters. The industry tilt of revolver rules is stronger when rulemakers have more discretion, when they receive feedback from industry entities that hire SEC alumni, and when they are closer to the time of revolving. Using the departure of peer rulemakers to the industry as an instrument for revolving, I provide evidence suggestive of a causal effect. Moreover, regulated firms earn higher abnormal returns around final rule releases when revolvers make the rule, especially firms that hire SEC alumni. Overall, the evidence is consistent with regulatory capture: revolving-door rulemakers shift SEC rules toward the industry's preferred direction at the expense of the public interest. My findings have implications for policies that regulate the revolving door and for research designs using SEC rules as exogenous shocks.

Abstract

Motivated by growing political polarization, this paper examines how ideological alignment between employees and their coworkers influences individual work performance. Using novel data on employee and coworker political ideology in the financial research industry, we find that sell-side equity analysts who are politically aligned with their brokerage coworkers issue less accurate earnings and target price forecasts. This underperformance is also reflected in weaker market reactions to aligned analysts' research outputs. At the stock level, greater coverage by aligned analysts is associated with larger consensus forecast errors, higher forecast dispersion and lower liquidity, suggesting broader market consequences. Consistent with an echo-chamber mechanism, further analyses show that aligned analysts exhibit stronger partisan biases, more concentrated and convergent information processing, and wider partisan differences in attention and responses to politically salient issues. To address alternative explanations related to selection and conflicts of interest, we exploit brokerage mergers and the analyst-independence rule. These findings highlight the informational costs that can arise when employees' political views align with the prevailing ideology of their workplace and contribute to understanding the economic consequences of workplace political polarization.

Abstract

Despite broad public support for progressive taxation, the U.S. tax system is among the most regressive in history. This paper shows that social ties between legislators and the ultra-rich help explain this mismatch. We use large language models to classify the progressivity of all tax bills introduced in Congress since 1973 and construct a new dataset linking Members of Congress to billionaires through overlap in higher education. Legislators with educational ties to billionaires sponsor more tax bills and their bills are more likely to be regressive rather than progressive, even when comparing legislators of the same party and birth cohort who attended the same university and served in the same Congress. The relationship is not explained by legislators' own wealth, is absent for legislators who attended a billionaire's campus at a different time, and is driven by connections to billionaires with inherited wealth rather than self-made entrepreneurs. Politician-billionaire ties also predict political giving: billionaires are about three times more likely to donate to legislators with whom they overlapped in college than random mixing would predict. Yet the greater tendency of connected legislators to sponsor regressive tax bills is not explained by donations from billionaires. Our findings identify social networks as a channel through which economic elites influence tax policymaking and speak to broader debates about unequal political representation and the perpetuation of economic inequality.

Abstract

Motivated by recent technological advances and the role of corporate culture in organizational change, we examine the impact of tech open corporate culture on firms' capital market performance amid technological disruptions. We develop a text-based measure of tech open corporate culture. Using the launch of a major large language model as our event, we find that tech openness is positively associated with firm value upon technological disruption. A one-standard-deviation increase is associated with a 0.85-percentage-point increase in cumulative abnormal returns around the 3-day event window. A long-short portfolio on tech openness earns 0.87 percentage points daily abnormal return during the same window. Our baseline result is stronger for firms whose investors are more aware of their culture. In sum, our study suggests that markets value tech open corporate culture as an intangible asset.