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The effects of surprise political events on quoted firms: the March 2004 election in Spain

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  • Pau Castells
  • Francesc Trillas

Abstract

In the last days of the electoral campaign for the 2004 general election in Spain, on Thursday March 11th 2004, a series of simultaneous terror attacks caused the death of 191 persons in commuting trains in the capital Madrid. Four days later, the opposition party won the election, against all predictions that were made prior to the terror attacks. This change in expectations presents a unique opportunity to take advantage of event study techniques to test some politico-economic hypotheses. The quantitative exercise is carried out employing Seemingly Unrelated Regressions (SUR). Hypothesis testing is improved by means of bootstrapping techniques. Convergence theories prove quite resilient as, jointly, quoted firms were not significantly affected by the election outcome. The impact on politically connected companies and particular economic sectors, however, suggest that a combination of capture and agency problems may play a role in explaining the effects of the change in expectations. Copyright The Author(s) 2013

Suggested Citation

  • Pau Castells & Francesc Trillas, 2013. "The effects of surprise political events on quoted firms: the March 2004 election in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(1), pages 83-112, March.
    • Handle: RePEc:spr:series:v:4:y:2013:i:1:p:83-112
    DOI: 10.1007/s13209-011-0080-5
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    1. Spanish companies which employ former politicians have seen their business returns fall, but politicians can still give companies unfair lobbying advantages.
      by Blog Admin in EUROPP European Politics and Policy on 2013-09-17 11:30:47

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    2. Germà Bel & Francisco González-Gómez & Andrés J. Picazo-Tadeo, 2015. "“Political connections, corruption, and privatization of public services: Evidence from contracting out water services in Spain”," IREA Working Papers 201515, University of Barcelona, Research Institute of Applied Economics, revised Jun 2015.
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    5. Stephens, John & Mehdian, Seyed & Gherghina, Ștefan Cristian & Stoica, Ovidiu, 2023. "The reaction of the financial market to the January 6 United States Capitol attack: An intraday study," Finance Research Letters, Elsevier, vol. 56(C).
    6. Beria, Paolo & Grimaldi, Raffaele & Albalate, Daniel & Bel, Germà, 2018. "Delusions of success: Costs and demand of high-speed rail in Italy and Spain," Transport Policy, Elsevier, vol. 68(C), pages 63-79.

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    More about this item

    Keywords

    Event study; Median voter; Agency; Capture; Elections; Political connections; G14; G15;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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