Paper short abstract:

I conduct the first systematic study of the effects of amakudari on firm-level outcomes. Using differences-in-differences methods, I show that following bureaucratic hires: (1) firms receive larger government loans, (2) firms receive stock price boosts, and (3) NPOs receive higher value contracts.

Paper long abstract:

A growing literature has established the high value of legislative connections to firms. Connections to political office holders are associated with boosts in operating profit margins; size of government loans received; probability of default; share prices; and likelihood of corporate bailout. However, political office is not the only form of government connection firms can leverage. Firms also regularly hire civil servants. Notably absent from the studies above is an examination of returns to office from these bureaucratic connections.

Using newly collected data that records the first non-bureaucracy position occupied by all former civil servants in Japan, I first shed light on the descriptive patterns of employment of former civil servants. I show that (1) amongst publicly traded firms, industries reliant on government contracts—such as transportation—and highly regulated industries—such as banking and insurance—are overrepresented in hiring compared to the overall economy, and (2) nonprofit organizations (NPOs) hire roughly one-third of former bureaucrats.

Next, I combine the data of revolving door hires with newly constructed datasets of all government loans to private firms, firm stock prices surrounding bureaucratic hires, and all government contracts with NPOs in Japan over a period of one decade to test for benefits that accrue to organizations that hire former bureaucrats. Using various differences-in-differences approaches, I find that (1) the volume of government loans increases in the years following a bureaucratic hire, (2) firms receive stock price boosts following high-ranking bureaucratic hires, and (3) the value of contracts negotiated between government agencies and NPOs are higher in years when former bureaucrats are on staff.