New York - New research shows that visiting the White House during
the Obama years yielded a payoff in the stock price of the visitor's company.
Will the same be true of the Trump years?
We may never know, because President Donald Trump has ended
Barack Obama's practice of making the visitor log public.The study, released
late last month on the website of the National Bureau of Economic
Research, found that the shares of companies whose top executives
visited White House officials performed about 0.9 percentage point better than
the overall stock market after the visits.
The authors, Jeffrey Brown and Jiekun Huang, finance
professors in the College of Business at the University of Illinois
at Urbana-Champaign, say the stock-market lift occurred from 10
trading days before the meetings to 40 trading days after them. They
reviewed 2,286 meetings between corporate executives and federal government
officials at the White House from 2009 through 2015, excluding meetings with 50
or more attendees, in which face time would presumably be limited.
"The evidence in our paper suggests that access to
high-level officials in the executive branch can be an important source of
competitive advantage for firms," they write. The paper, "the
entire President's Friends: Political Access and Firm Value," can
be downloaded from the NBER site for $5.
Read also: JSE cancels Oakbay trades, starts probe
As a test of their results, Brown and Huang looked at how the
companies that benefited from access to the Obama White House did after Trump's
surprise election. In the three days after the voting, the companies
underperformed the overall market by about 0.8 percentage points, they found.
That was all the time it took to see the difference the new president made.
A thorough study of Trump administration visits and
corresponding stock performance would be impossible, because the president on
April 14 closed the visitor logs to public inspection. At the time, White
House Communications Director Mike Dubke cited “grave national security risks
and privacy concerns.”
"We agree there are major risks associated with the
documents’ release," Brown and Huang wrote in an article about their
research that was published online by Politico Magazine on May 8 "Political
ones."
Among corporate chieftains in Brown and Huang's study, the
three most frequent White House visitors during the period were David
Cote, then CEO of Honeywell International, with 30 visits; Jeffrey Immelt, CEO
of General Electric, with 22 visits; and Roger Altman, executive chairman
of Evercore Partners, with 21 visits.
All three had things to discuss aside from their own
businesses. Cote, who is now Honeywell's
executive chairman, was appointed by Obama in 2010 to serve on a blue-ribbon
deficit reduction commission. Immelt, was chair of Obama's Council on Jobs and
Competitiveness. And Altman was interviewed by Obama as a possible director of
the National Economic Council.
Regardless of why they were there, it clearly doesn't hurt
to get face time with the president or his top aides which is why
good-government types say it's important to know who gets into the White House.
"Trump is avoiding criticism about who visits him, and
he’s avoiding scrutiny by voiding the voluntary disclosure policy," said
John Wonderlich, executive director of the Sunlight Foundation, which favours
public disclosure of government affairs.
"This study tells us that the Obama
administration did have deep ties with CEOs of top American
companies," Wonderlich said. "The Trump administration is also
going to have deep ties." According to the finance professors'
research, the three people in the White House who were most visited were
Valerie Jarrett, senior adviser to President Obama, with 107 visits; Jeffrey
Zients, director of the Office of Management and Budget and later director of
the National Economic Council, with 103 visits; and Obama himself, with
100 visits.
Kevin Lewis, a spokesman for the former president, said
Obama had no immediate comment on the research. GE pointed out Immelt's
White House appointment. Honeywell didn't have an immediate comment.
Evercore, declined to comment. Brown, the co-author, is
familiar with the White House, having served as a senior economist on President
George W. Bush's Council of Economic Advisers in 2001 and 2002. He served on
Bush's Social Security Advisory Board from 2006 to 2008.
The Obama administration voluntarily released logs of all
White House visits except for personal family visits and sensitive personnel
matters such as visits of potential Supreme Court nominees. Previous presidents
had more restrictive disclosure policies.
BLOOMBERG