This study examines how corporate lobbying influences firms’ pursuit of market-based strategic actions, particularly mergers and acquisitions (M&As), and with what consequences for firm performance. Although there is a longstanding logic suggesting that lobbying fosters beneficial government decisions and enhances firm outcomes, empirical findings remain inconclusive. To address this, we adopt an integrated view of nonmarket and market strategies. Drawing on a large panel of S&P 1500 firms (2005-2019) and leveraging random changes in congressional committee assignments that generate exogenous shocks to firm-politician ties, we provide causal evidence on how lobbying breadth—the range of issues on which a firm lobbies—enables firms to undertake more large M&As. However, these acquisitions often erode shareholder value, creating a negative indirect effect of lobbying breadth on performance. We further find that board political connections intensify both the likelihood of engaging in acquisitions and the associated performance penalties, revealing a critical boundary condition of board effectiveness. Overall, our findings offer a more nuanced perspective on the lobbying–performance link by illuminating the intervening role of market actions such as acquisitions. While lobbying may indeed smooth the path for strategic actions favored by managers, it can also produce negative spillovers for shareholders. These insights carry policy implications, highlighting that political ties may expedite deals that are not necessarily aligned with broader economic or consumer interests.
