Researchers from Rice University in Texas and Long Island University in New York analyzed end-of-year stock value and return on assets of 943 companies in the S&P 1500 over 11 years and lined up those factors against spending on campaign donations, lobbyists and other political giving.

The researchers looked at some $5 billion in spending from 1998 to 2008 in their study that will be published in the fall. Their findings showed that on average, the more a company shelled out for government affairs and political interests at the federal level, the worse it performed financially.

"If you look at most of the literature on business management and strategy, the implication is that these investments really pay off," Doug Schuler, study co-author and professor of business and public policy at Rice, told Reuters.

"But we found a really persistent negative relationship" between political activity and market performance, he said.

The research also found that in terms of return on sales, higher political spending on average had either marginally negative, or statistically insignificant impacts.

The only instance of benefit was over time in those industries researchers found substantially regulated, such as oil, telecommunications, insurance or utilities - representing about 10 percent of the companies they considered.

"If you're regulated and for many years you keep repeatedly investing in (political activity), then you'll realize some return on your investments. Then and only then it makes financial sense," said Michael Hadani, co-author of the study and assistant professor of management at Long Island University.

The study also found little financial benefit in putting former federal or state officials, such as ambassadors or secretaries, on corporate boards of directors.

Looking at 72 firms with politically tied directors in their sample, researchers again linked their presence to inferior market and accounting performance.

The study, titled "In Search of El Dorado: The Elusive Financial Returns on Corporate Political Investments" is expected to be published in the Strategic Management Journal.

(Editing by David Brunnstrom and Eric Walsh)

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