Does it pay to lobby? Examining the link between firm lobbying and firm profitability in the European Union

Does firm lobbying in the EU increase firm profitability? While there is a well-established literature on this issue in the US context, existing EU studies have overlooked this question. Ours is the first study to examine links between firm lobbying and firm profitability. To this end, we tailor theoretical insights from the US context to the EU. While money plays a fundamentally different role in EU lobbying compared to the US, the lobbying context and legislative processes of the EU are conducive to firm lobbying efforts translating into firm profits. Our two-stage OLS regression results, using a novel dataset for 728 firms over a four-year period, support this argument. Specifically, we find that the more money firms channel into their lobbying activities, the more tangible returns on this investment they can expect.