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

Author

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  • Renaud Coulomb

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Marc Sangnier

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

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.

Suggested Citation

  • Renaud Coulomb & Marc Sangnier, 2012. "Impacts of Political Majorities on French Firms: Electoral Promises or Friendship Connections?," Working Papers halshs-00671405, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00671405
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00671405v2
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    References listed on IDEAS

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    1. Manski, Charles F., 2006. "Interpreting the predictions of prediction markets," Economics Letters, Elsevier, vol. 91(3), pages 425-429, June.
    2. Lauren Cohen & Andrea Frazzini & Christopher Malloy, 2008. "The Small World of Investing: Board Connections and Mutual Fund Returns," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 951-979, October.
    3. Erik Snowberg & Justin Wolfers & Eric Zitzewitz, 2007. "Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 807-829.
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    Cited by:

    1. Stefano DellaVigna & Ruben Durante & Brian Knight & Eliana La Ferrara, 2016. "Market-Based Lobbying: Evidence from Advertising Spending in Italy," American Economic Journal: Applied Economics, American Economic Association, vol. 8(1), pages 224-256, January.
    2. repec:hal:spmain:info:hdl:2441/ismjpe8i38qaqpf7c0hldeicl is not listed on IDEAS
    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," IDEI Working Papers 817, Institut d'Économie Industrielle (IDEI), Toulouse.
    5. 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.
    6. 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.

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    More about this item

    Keywords

    Political Majority; Prediction Markets; Firms Value; Abnormal Returns; Social Network; Political Connections; Majorités politiques; Marchés prédictifs; Valeurs boursières; Rendements anormaux; Réseau social;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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