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Elections and political risk: New evidence from the 2008 Taiwanese Presidential Election

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  • Imai, Masami
  • Shelton, Cameron A.

Abstract

We examine the effects of party platforms on the economic opportunities of firms using a unique data set from a political prediction market in Taiwan, a country with two dominant parties whose political cleavage derives mainly from a single issue: the "One China Principle". We find that during the 2008 Presidential campaign, the share price of Taiwanese firms with investments in the mainland responded strongly and positively to a positive electoral outlook for the KMT, the party which advocates lifting caps on cross-strait investment in mainland China. The response is strongest for those firms who have already hit their caps.

Suggested Citation

  • Imai, Masami & Shelton, Cameron A., 2011. "Elections and political risk: New evidence from the 2008 Taiwanese Presidential Election," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 837-849, August.
    • Handle: RePEc:eee:pubeco:v:95:y:2011:i:7-8:p:837-849
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    Cited by:

    1. Carvalho, Augusto & Guimaraes, Bernardo, 2018. "State-controlled companies and political risk: Evidence from the 2014 Brazilian election," Journal of Public Economics, Elsevier, vol. 159(C), pages 66-78.
    2. Chen, Pei-Fen & Liu, Ping-Chin, 2013. "Bank ownership, performance, and the politics: Evidence from Taiwan," Economic Modelling, Elsevier, vol. 31(C), pages 578-585.
    3. Quoc-Anh Do & Yen-Teik Lee & Bang Dang Nguyen, 2013. "Political Connections and Firm Value: Evidence from the Regression Discontinuity Design of Close Gubernatorial Elections," Working Papers hal-03460972, HAL.
    4. 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.
    5. Chune Young Chung & Jung Hoon Byun & Jason Young, 2019. "Corporate Political Ties and Firm Value: Comparative Analysis in the Korean Market," Sustainability, MDPI, vol. 11(2), pages 1-25, January.
    6. Hoi, Weng Ian & Chen, Chi-Yu & Weng, Pei-Shih, 2025. "Do political preferences shape retail investors' decisions? Evidence from the Taiwan stock market," Pacific-Basin Finance Journal, Elsevier, vol. 90(C).
    7. Ben-Nasr, Hamdi & Bouslimi, Lobna & Ebrahim, M. Shahid & Zhong, Rui, 2020. "Political uncertainty and the choice of debt sources," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 64(C).
    8. Lin, Chih-Yung & Ho, Po-Hsin & Shen, Chung-Hua & Wang, Yu-Chun, 2016. "Political connection, government policy, and investor trading: Evidence from an emerging market," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 153-166.
    9. Quoc-Anh Do & Yen-Teik Lee & Bang Dang Nguyen, 2013. "Political Connections and Firm Value: Evidence from the Regression Discontinuity Design of Close Gubernatorial Elections," Sciences Po Economics Publications (main) hal-03460972, HAL.
    10. Thomas Bourveau & Renaud Coulomb & Marc Sangnier, 2016. "Political Connections and Insider Trading," Working Papers halshs-01376148, HAL.
    11. Renaud Coulomb & Marc Sangnier, 2014. "The Impact of Political Majorities on Firm Value: Do Electoral Promises or Friendship Connections Matter?," PSE Working Papers halshs-00990241, HAL.
    12. Ghalke, Avinash & Sensarma, Rudra & Chakraborty, Sandip & Kakani, Ram Kumar, 2023. "Stock markets and economic uncertainty: Roles of legislative sessions and coalition strength," European Journal of Political Economy, Elsevier, vol. 78(C).
    13. Zhou, Zhengyi, 2017. "Government ownership and exposure to political uncertainty: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 84(C), pages 152-165.
    14. Lee, Jen-Sin & Yen, Pi-Hsia & Lee, Liang-Chien, 2019. "Political connection and stock returns: Evidence from party alternation in Taiwan," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 128-137.
    15. Shen, Chung-Hua & Lin, Chih-Yung, 2015. "Betting on presidential elections: Should we buy stocks connected with the winning party?," The Quarterly Review of Economics and Finance, Elsevier, vol. 56(C), pages 98-109.
    16. Fan, Wen & Liang, Yu, 2020. "The impact of school autonomy and education marketization in the United Kingdom," Journal of Policy Modeling, Elsevier, vol. 42(5), pages 1038-1048.
    17. He, Yinghua & Nielsson, Ulf & Wang, Yonglei, 2017. "Hurting without hitting: The economic cost of political tension," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 51(C), pages 106-124.
    18. Aziz N. Berdiev & Chun-Ping Chang, 2013. "Explaining Voter Turnout in Taiwan Legislative Elections," International Economic Journal, Taylor & Francis Journals, vol. 27(4), pages 645-661, December.
    19. Narayan, Paresh Kumar & Narayan, Seema, 2021. "Do opinion polls on government preference influence stock returns?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    20. 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).

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    Keywords

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    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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