L >ll\ E RsI I *] FLORIDl
% r /.-.- j
Contact & Staff
University Scholars Program
2004 - 2005 University Scholar
Mentor: Joel Houston
Warrington College of Business
American businesses donate millions of dollars to political campaigns in hopes of gaining
support from lawmakers and earning political favor. But University Scholar Marvin McTaw
says this behavior is a gamble that the House (or the Senate) almost always wins.
"If you think of political donations as an investment the company is making in political
infrastructure, then they are expecting some sort of return," says McTaw, a business and
political science double major. "I wanted to see what kind of return these companies gain
in their share price, and whether or not they are building any shareholder wealth, by
giving to political campaigns."
Using data collected by the Center for Responsive Politics, McTaw studied the S&P returns
of the top 37 company donors to federal campaigns during the 2000 general election and
created four portfolios for further analysis-companies whose contributions could be
viewed as Strong Democrat, Strong Republican, Weak Democrat or Weak Republican.
"Strong" portfolios were companies that gave more than 60 percent of their overall
donations to either Democrats or Republicans, while "Weak" portfolio members gave 50-
60 percent to a party.
Law firms, securities/investment companies and real estate companies were the highest
contributors. Altria Group-the parent company for Kraft Foods and Phillip Morris-was
the top donor, donating nearly $21 million, largely to Republicans (62 percent). FedEx
closely followed Altria, giving just $61,000 less, also mostly to Republicans (65 percent).
The United Parcel Service (UPS) gave 70 percent of its $17 million to Republicans. AT&T
kept its options open, splitting its $19.5 million almost equally between the two parties.
Railway companies largely supported Republicans, with Union Pacific allocating 78
percent of its $10.5 million to Republicans and CSX giving 72 percent of its nearly $7
million to Republicans.
While the majority of companies favored the Republican Party, the Democrats did not go
penniless. Time Warner gave 75 percent of its $14 million to Democrats, Microsoft gave
59 percent of its $13 million to them, and the Walt Disney Company gave 69 percent of
its $8 million to Democrats as well.
The top 37 companies gave a combined $1 billion during the 2000 election, but according
to McTaw's findings, it was money wasted. "Companies didn't really have any statistically
significant excess returns," he says. "This is significant, because if shareholders receive
no additional benefit, then companies shouldn't be making these political donations."
McTaw realizes, though, that although there was no pecuniary benefits easily measured
quantitatively that these companies likely receive special treatment for their support,
though this is harder to measure.
"Companies donate money to politicians now in order to make an investment in the
future for them to vote on something that will be favorable for the company or as a pay
off for services that have already been rendered," he says. "A good example of this is
Enron. A lot of people looked at Enron and saw all the money they were donating to the
Republican Party and President George W. Bush and how they have supported him over
his political career. Once Bush became president there were political appointments of
former Enron executives and de-regulation of certain markets that were favorable to
Enron. Some look at this as a political investment Enron made in the form of corporate
One particularly interesting finding McTaw says he discovered was that all the Republican
portfolios were negatively correlated. "Basically, what that means is when the
Republicans are doing better politically you see that everyone does worse," he says. "I
found that to be pretty interesting because companies, as a whole, give a majority of
their money to Republicans and Republicans are seen as the pro-business party."
McTaw got the idea for his University Scholars project after reading a story in the Wall
Street Journal, "Kerry Up, Markets Down"-implying that because Senator John Kerry
was doing well in the polls during that point in his presidential campaign, the stock
market seemed to be doing poorly. "I found it interesting because these were two areas I
was studying in school and thought it would be a great way to combine both finance and
I IN I Journal of Undurgraduate Re~carch Universilyof Florid
McTaw further developed the idea with his mentor, Finance Professor Joel Houston, and
used it for his honor's thesis. "He was a great advisor," McTaw says. "Any time I had a
brain freeze or a problem he was always there to show me the right direction." McTaw
graduated with highest honors in the spring and was a valedictorian in the College of
Liberal Arts and Sciences and a UF Outstanding Four-Year Scholar.
The lifetime Gainesvillian came to UF in the fall of 2001 after graduating from the College
of Education's PK Young Development Research School. "I guess you could say I have
been a Gator since I was in third grade," he laughs. The 'Gator' is preparing to take a
chomp out of the Big Apple, going to work this month as an analyst for the investment
bank, JP Morgan, in New York City. It won't be his first experience in Manhattan-he
interned there last summer for Citigroup. He will be working on Park Avenue and says he
is looking forward to the change and the challenge. "I view it as an investment of my
time," he says, ever the businessman. "It will be a great opportunity to learn more about
the financial services industry first-hand, meet new and interesting people, and further
develop a highly transferable skill set." McTaw is also considering law school in the
Back to the Journal of Undergraduate Research
College of Liberal Arts and Sciences I University Scholars Program I University of Florida NIVERSITY
ï¿½ University of Florida, Gainesville, FL 32611; (352) 846-2032. FLORIDA
' *' ' ' ' I'f ! iiii~il liM 0, r"i-Goiiy ^iil-i