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Do elections shape firm dynamics?

Author

Listed:
  • Florian Léon

    (FERDI - Fondation pour les Etudes et Recherches sur le Développement International, CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)

  • Laurent Weill

    (UNISTRA - Université de Strasbourg, FSV UK - Fakulta sociálních věd, Univerzita Karlova [Praha, Česká republika] = Faculty of Social Sciences, Charles University [Prague, Czech Republic] - UK - Univerzita Karlova [Praha, Česká republika] = Charles University [Prague, Czech Republic])

Abstract

This paper examines the impact of elections on firm dynamics. We investigate how electoral cycles affect the total number of firms, firm entries, and firm exits using a comprehensive dataset covering 132 countries from 2006 to 2022. Our findings indicate that elections do not significantly impact the total number of firms or firm creation. However, we document a reduction in firm exits during election years and the subsequent post-election period, particularly in democratic countries. This suggests that incumbent governments may engage in economic manipulation to stabilize economic conditions and minimize business closures around elections. The absence of a corresponding increase in firm entries highlights the asymmetric political incentives favoring short-term economic stability over long-term entrepreneurial activity.

Suggested Citation

  • Florian Léon & Laurent Weill, 2025. "Do elections shape firm dynamics?," Post-Print hal-05370121, HAL.
    • Handle: RePEc:hal:journl:hal-05370121
    DOI: 10.1016/j.ecosys.2025.101357
    Note: View the original document on HAL open archive server: https://hal.science/hal-05370121v1
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    Keywords

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    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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