Social Network Ties and Financial Industry Lobbying in the European Union

Our paper examines the web of social network ties that link financial industry firms together in their lobbying practices. The broader interest group literature has long acknowledged the importance of social network ties to lobbying practices. Current research on financial industry lobbying, however, tends to characterize lobbying on financial regulation as a ‘lone wolf’ affair devoid of any type of interaction with other firms. Our empirical focus in this paper is on ‘formal’ lobbying coalitions, namely trade and business associations that represent individual financial firms and that lobby on their behalf (e.g., the Institute of International Finance or the International Swaps and Derivatives Association). Drawing on a novel dataset capturing lobbying on several key post-crisis EU directives and regulations, we examine three key research questions: (1) When and why do firms allow their existing formal coalitions to lobby on their behalf (the Delegation Strategy)?; (2) When do firms lobby alongside (and simultaneously to) their coalitions (the Insurance Strategy)?; finally (3) when do firms switch sides, engaging in competitive ‘counter-active’ lobbying against former coalition allies (the Defection Strategy)? Rigorous coding of different types of financial firms (banking, securities markets, and insurance activities) and their formal coalitions, reveals variation in these strategies across sectors (does banking, for example, differ from insurance?), the extent to which ‘mixed’ coalitions form across financial industry sectors (e.g., hedge funds firms with membership in insurance-related coalitions), and variation in lobbying strategies for these coalitions (e.g., are mixed-coalitions more or less prone to Defection strategies?). We find that coalitional lobbying strategies, like Delegation and Insurance, are commonplace in financial industry lobbying and constitute the vast majority of lobbying captured in our dataset. Defection Strategies, however, are far rarer. Importantly, patterns of ‘Defection’ are most prevalent in single-sector coalitions.