Beyond the revolving door: Advocacy behavior and social distance to financial regulators

Abstract

The financial system is governed not just by formal rules but also by social relationships that pervade the elite strata of society. Understanding such dynamics entails understanding complex relational ties between actors, a task that can be facilitated through the use of network analysis. We argue that a latent feature of interest to scholars of the political economy of finance is one of social distance, which is a measurable concept. Using new data from the financial sector, we measure the social distance between a range of financial firms and one key regulator, the U.S. Securities and Exchange Commission (SEC), over time to assess whether or not social distance is related to organizations’ advocacy behavior. We find a positive relationship between how close a given organization is to the SEC and how often it engages in advocacy. The result persists when we control for numerous factors related to organizational characteristics, firm size, and when we measure advocacy frequency in different ways.

The Politics of Rulemaking in the United States

“…Furthermore, given the complexity and technical knowledge attached to some regulatory fields, individuals may cycle in and out of government work and industry, creating connections and PL22CH02_Yackee ARjats.cls October 31, 2018 14:2 increasing influence. Young et al (2017), using network analysis techniques, study how "close" select business organizations are to the US Securities and Exchange Commission (SEC). They focus on employment ties and find that when there are greater direct and indirect ties between an organization's employees and the SEC, those organizations have a greater likelihood of submitting public comments to the SEC.…”

How white is the global elite? An analysis of race, gender and network structure

“…Our project significantly extends prior analyses in several ways, beginning with analyses that go beyond just the corporate world and into a broader organizational terrain, in acknowledgement of the array of organizations that reflect elite sociality (Carroll and Sapinsky 2010;Khan 2012;Young et al 2017). In addition to examining the top corporations in the world, we study a range of organizations, including think tanks, international organizations, non-governmental organizations, and transnational policy planning groups.…”

“…Board ties link organizations together through their governing personnel -a board member for General Motors who also sits on the board of the Brookings Institution and the Gates Foundation can act as a mediator between these organizations and transfer information and social cues between them. While the majority of prior work has been focused on the corporate world (Fennema and Heemskerk 2018;Murray 2017), recent research has also investigated connections through a range of different employment ties across organizations (Carroll and Sapinsky 2010;Ellersgaard et al 2013;Seabrooke and Tsingou 2014;Young et al 2017). For example, a range of empirical studies find that national elite ties make a difference to strategies of political action (Useem 1984), that Europewide ties impact aspects of European governance , and even that transnational board ties of corporations inform political strategies at the national level (Chu and Davis 2016;Luther-Davies et al 2020;Murray 2014Murray , 2017.…”

The promise and perils of using big data in the study of corporate networks: problems, diagnostics and fixes

“…It is of course possible to utilize this kind of information when it is available. Marple et al (2017) and Young et al (2017) utilize large lists of corporate family structures, including branches, subsidiaries and shell companies, among the largest 500 corporations in the world as the basis to batchreplace existing names in the network.…”