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Corporate campaign contributions and abnormal stock returns after presidential elections

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  • Jürgen Huber
  • Michael Kirchler

Abstract

Contributions by investor-owned companies play major roles in financing the campaigns of candidates for elective office in the United States. We look at the presidential level and analyze contributions by companies before an election and their stock market performance following US presidential elections from 1992 to 2004. We find that companies experienced abnormal positive post-election returns with (i) a higher percentage of contributions given to the eventual winner and (ii) with a higher total contribution given. Hypothetical portfolios of the 30 largest corporate contributors formed according to (i) the percentage of contributions given to the winner in a presidential election and (ii) the total contribution (divided by market capitalization) would have earned significant abnormal returns in the two years after an election. While all results hold for Bill Clinton and George W. Bush, they are stronger by a magnitude of two to three under W. Bush. Copyright Springer Science+Business Media, LLC 2013

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  • Jürgen Huber & Michael Kirchler, 2013. "Corporate campaign contributions and abnormal stock returns after presidential elections," Public Choice, Springer, vol. 156(1), pages 285-307, July.
    • Handle: RePEc:kap:pubcho:v:156:y:2013:i:1:p:285-307
    DOI: 10.1007/s11127-011-9898-4
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    2. Manjhi, Ganesh & Mehra, Meeta Keswani, 2017. "Dynamics of the Economics of Special Interest Politics," Working Papers 17/206, National Institute of Public Finance and Policy.
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    9. Rajwani, Tazeeb & Liedong, Tahiru Azaaviele, 2015. "Political activity and firm performance within nonmarket research: A review and international comparative assessment," Journal of World Business, Elsevier, vol. 50(2), pages 273-283.

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    More about this item

    Keywords

    D72; G10; P16; Presidential election; Corporate campaign contributions; Abnormal returns;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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