Advanced Search
MyIDEAS: Login to save this paper or follow this series

Impacts of Political Majorities on French Firms: Electoral Promises or Friendship Connections?

Contents:

Author Info

  • Renaud Coulomb

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

  • Marc Sangnier

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

Abstract

This paper analyzes the impact of changes in the winning chances of candidates running for the 2007 French presidential election on abnormal stock returns of firms that could benefit from a candidate's victory. We use prices formed by transactions on a political prediction market to reveal the probabilities of victory of S. Royal and N. Sarkozy. We find that changes in S. Royal's probability of victory have no impact on firms that should benefit from her party platform. On the opposite, abnormal returns of firms that should benefit from reforms announced by N. Sarkozy or that are directed or owned by his friends are positively correlated with changes in his probability of victory. Both effects appear to be independent and the network effect is fifty percents larger than the other one. All these results persist when we take into account specific characteristics of firms.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://halshs.archives-ouvertes.fr/docs/00/68/13/25/PDF/wp201208.pdf
Download Restriction: no

Bibliographic Info

Paper provided by HAL in its series PSE Working Papers with number halshs-00671405.

as in new window
Length:
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:hal:psewpa:halshs-00671405

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00671405
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/

Related research

Keywords: Political Majority ; Prediction Markets ; Firms Value ; Abnormal Returns ; Social Network ; Political Connections;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Renaud Coulomb & Marc Sangnier, 2014. "The Impact of Political Majorities on Firm Value: Do Electoral Promises or Friendship Connections Matter?," AMSE Working Papers 1414, Aix-Marseille School of Economics, Marseille, France, revised May 2014.
  2. Quoc-Anh Do & Yen-Teik Lee & Bang Dang Nguyen & Kieu-Trang Nguyen, 2012. "Out of Sight, Out of Mind: The Value of Political Connections in Social Networks," Working Papers 22-2012, Singapore Management University, School of Economics.
  3. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
  4. Faccio, Mara & Parsley, Davie, 2007. "Sudden Deaths: Taking Stock of Geographic Ties," MPRA Paper 6042, University Library of Munich, Germany.
  5. Lauren Cohen & Andrea Frazzini & Christopher Malloy, 2007. "The Small World of Investing: Board Connections and Mutual Fund Returns," NBER Working Papers 13121, National Bureau of Economic Research, Inc.
  6. Jayachandran, Seema, 2006. "The Jeffords Effect," Journal of Law and Economics, University of Chicago Press, vol. 49(2), pages 397-425, October.
  7. Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
  8. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510944, December.
  9. Mattozzi, Andrea, 2004. "Can we insure against political uncertainty? Evidence from the U.S. Stock Market," Working Papers 1207, California Institute of Technology, Division of the Humanities and Social Sciences.
  10. Stefan Luckner & Christof Weinhardt, 2007. "How to pay traders in information markets? Results from a field experiment," Artefactual Field Experiments 00107, The Field Experiments Website.
  11. Yan-Leung Cheung & P. Raghavendra Rau & Aris Stouraitis, 2010. "Helping Hand or Grabbing Hand? Central vs. Local Government Shareholders in Chinese Listed Firms," Review of Finance, European Finance Association, vol. 14(4), pages 669-694.
  12. Simon Johnson & Todd Mitton, 2001. "Cronyism and Capital Controls: Evidence from Malaysia," NBER Working Papers 8521, National Bureau of Economic Research, Inc.
  13. Eitan Goldman & Jörg Rocholl & Jongil So, 2009. "Do Politically Connected Boards Affect Firm Value?," Review of Financial Studies, Society for Financial Studies, vol. 22(6), pages 2331-2360, June.
  14. Manski, Charles F., 2006. "Interpreting the predictions of prediction markets," Economics Letters, Elsevier, vol. 91(3), pages 425-429, June.
  15. Paul W. Rhode & Koleman S. Strumpf, 2004. "Historical Presidential Betting Markets," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 127-141, Spring.
  16. Gökçe Göktepe & Shanker Satyanath, 2013. "The economic value of military connections in Turkey," Public Choice, Springer, vol. 155(3), pages 531-552, June.
  17. Thomas Ferguson & Hans-Joachim Voth, 2008. "Betting on Hitler-The Value of Political Connections in Nazi Germany," The Quarterly Journal of Economics, MIT Press, vol. 123(1), pages 101-137, 02.
  18. Snowberg, Erik & Wolfers, Justin & Zitzewitz, Eric, 2006. "Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections," Research Papers 1928, Stanford University, Graduate School of Business.
  19. Li, Hongbin & Meng, Lingsheng & Wang, Qian & Zhou, Li-An, 2008. "Political connections, financing and firm performance: Evidence from Chinese private firms," Journal of Development Economics, Elsevier, vol. 87(2), pages 283-299, October.
  20. Michael J. Cooper & Huseyin Gulen & Alexei V. Ovtchinnikov, 2010. "Corporate Political Contributions and Stock Returns," Journal of Finance, American Finance Association, vol. 65(2), pages 687-724, 04.
  21. Christian Slamka & Arina Soukhoroukova & Martin Spann, 2008. "Event Studies in Real- and Play-Money Prediction Markets," Journal of Prediction Markets, University of Buckingham Press, vol. 2(2), pages 53-70, September.
  22. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
  23. Fan, Joseph P.H. & Wong, T.J. & Zhang, Tianyu, 2007. "Politically connected CEOs, corporate governance, and Post-IPO performance of China's newly partially privatized firms," Journal of Financial Economics, Elsevier, vol. 84(2), pages 330-357, May.
  24. Stefan Luckner & Christof Weinhardt, 2007. "How to Pay Traders in Information Markets: Results from a Field Experiment," Journal of Prediction Markets, University of Buckingham Press, vol. 1(2), pages 147-156, July.
  25. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Renaud Coulomb & Marc Sangnier, 2012. "Impacts of Political Majorities on French Firms: Electoral Promises or Friendship Connections?," PSE Working Papers halshs-00671405, HAL.
  2. Stefano DellaVigna & Ruben Durante & Brian Knight & Eliana La Ferrara, 2013. "Market-based Lobbying: Evidence from Advertising Spending in Italy," Working Papers 505, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  3. Coulomb, Renaud & Sangnier, Marc, 2014. "The impact of political majorities on firm value: Do electoral promises or friendship connections matter?," Journal of Public Economics, Elsevier, vol. 115(C), pages 158-170.
  4. Straub, Stéphane, 2014. "Political Firms, Public Procurement, and the Democratization Process," TSE Working Papers 14-461, Toulouse School of Economics (TSE).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hal:psewpa:halshs-00671405. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.