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Corporate campaign contributions and abnormal stock returns after presidential elections

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  • Jürgen Huber
  • Michael Kirchler

Abstract

In the U.S. campaign contributions by companies play a major role in financing election campaigns. We analyze contributions by companies before an election and stock market performance after the election for the presidential elections from 1992 until 2004. We find that (i) the percentage of contributions given to the winner in a presidential election and (ii) the total contribution (divided by market capitalization) have a significant positive impact on a company's stock market performance after an election, with the second factor being more important. Furthermore, we find that hypothetical portfolios of the 30 highest contributors according to (i) would have earned significant abnormal returns of up to 0.54% per month (6.6% p.a.) during the first year after an election. Investing in a portfolio formed according to (ii) would have yielded abnormal returns of up to 1.21% per month (15.5% p.a.) for the same observation period.

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  • Jürgen Huber & Michael Kirchler, 2008. "Corporate campaign contributions and abnormal stock returns after presidential elections," Working Papers 2008-18, Faculty of Economics and Statistics, Universität Innsbruck.
    • Handle: RePEc:inn:wpaper:2008-18
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    3. Luechinger, Simon & Moser, Christoph, 2014. "The value of the revolving door: Political appointees and the stock market," Journal of Public Economics, Elsevier, vol. 119(C), pages 93-107.
    4. Gao, Yu & Yang, Zhuoer & Huang, Kuo-Feng & Gao, Shanxing & Yang, Wei, 2018. "Addressing the cross-boundary missing link between corporate political activities and firm competencies: The mediating role of institutional capital," International Business Review, Elsevier, vol. 27(1), pages 259-268.
    5. 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.
    6. Ganesh Manjhi & Meeta Keswani Mehra, 2019. "A Dynamic Analysis of Special Interest Politics and Electoral Competition," Dynamic Games and Applications, Springer, vol. 9(1), pages 142-164, March.
    7. Jackowicz, Krzysztof & Kozłowski, Łukasz & Podgórski, Błażej, 2022. "Political appointees and firms’ long-term capital market performance: Evidence from Central European countries," Finance Research Letters, Elsevier, vol. 49(C).
    8. 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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    More about this item

    Keywords

    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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