Tug of War in Corporate Environmental Lobbying

We investigate how firms with opposing environmental profiles can engage in political competition to influence policymakers’ decisions through lobbying and examine the resulting impacts. Our theoretical model predicts that these firms end up spending more on lobbying due to the political competition, especially when the environmental policy uncertainty is higher. We empirically test the lobbying “tug of war” using U.S. corporate lobbying data. Importantly, excessive lobbying increases the cost of capital and decreases a firm’s R&D investment, capital investment, and sales growth. Overall, our study reveals the hidden costs of intense lobbying competition among firms with opposing environmental stances.

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