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The Impact of Political Majorities on Firm Value: Do Electoral Promises or Friendship Connections Matter?

Listed author(s):
  • Renaud Coulomb

    ()

    (Paris School of Economics, and London School of Economics and Political Science (LSE), Grantham Research Institute)

  • Marc Sangnier

    ()

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

This paper simultaneously estimates the impact of political majorities on the values of firms that would benefit from the platforms of the two main candidates at the 2007 French presidential election, Ségolène Royal and Nicolas Sarkozy, and of those that are ruled or owned by Sarkozy’s friends. We use prediction-market data to track each candidate’s victory probability, and investigate how this relates to firms’ abnormal returns. Our estimates suggest that the value of firms that would likely benefit from the platforms of Royal and Sarkozy changed by 1% and 2%, respectively, with the candidates’ victory probabilities, and that firms connected to Sarkozy out-performed others by 3% due to his election.

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Paper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1414.

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Length: 39 pages
Date of creation: May 2014
Date of revision: May 2014
Handle: RePEc:aim:wpaimx:1414
Contact details of provider: Web page: http://www.amse-aixmarseille.fr/en

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