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State-level politics: Do they influence corporate investment decisions?

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  • Narayan, Paresh Kumar
  • Narayan, Seema
  • Tran, Vuong Thao
  • Thuraisamy, Kannan

Abstract

Motivated by the real options theory, we develop the hypothesis that political outcomes (POs) influence corporate investment (CI). We show that POs influence CI strongly when a sample of all 1331 Australian firms are modelled as a panel. The effect of POs on CI at the Australian state-level is heterogenous with some states more affected than others and with some PO variables more influential than others. We also confirm that when confronted with a large sample of firms, firm characteristics such as political connections, size and capital intensity do matter in terms of whether POs influence CI.

Suggested Citation

  • Narayan, Paresh Kumar & Narayan, Seema & Tran, Vuong Thao & Thuraisamy, Kannan, 2021. "State-level politics: Do they influence corporate investment decisions?," International Review of Financial Analysis, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:finana:v:74:y:2021:i:c:s105752192100051x
    DOI: 10.1016/j.irfa.2021.101708
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    More about this item

    Keywords

    Corporate investment; Political outcomes; Australia;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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