Political Uncertainty and Financial Firm Performance: Evidence from the Thai Economy as an Emerging Market in Asia

Abstract

This study analyzes the effects that certain political-uncertainty factors have on financial firm performance in the Stock Exchange of Thailand (SET). The results of a panel regression performed on a database of 7976 firm-years over 18-year unbalanced panel data from 2001 to 2018 show a mixed relationship between political uncertainty and firm performance. The constitutional reform harms the return on assets (ROA), and the government election and political protest significantly decreased the market value of equity (MVE). In contrast, constitutional reform increased MVE, and the government election positively impacted ROA. Therefore, this study emphasizes how political unpredictability is assumed to influence firm performance in Thailand’s economy, an Asian developing country.

Assessing Financial Stability in Turbulent Times: A Study of Generalized Autoregressive Conditional Heteroskedasticity-Type Value-at-Risk Model Performance in Thailand’s Transportation Sector during COVID-19

“…The SET plays a pivotal role in capital allocation and offers a plethora of investment opportunities to both local and global investors (Sutheebanjard and Premchaiswadi 2010). Recognized as an emerging market, it is often associated with high growth potential (Trakarnsirinont et al 2023;Meeampol et al 2014). However, investments in such markets carry inherently higher risks compared with developed markets, as evidenced by their greater volatility and return anomalies (Mody 2003;Bekaert and Harvey 2003;Bekaert et al 1998).…”

Political Uncertainty and Initial Public Offerings: A Literature Review

“…Any changes brought in can impact a firm's value and investment behavior, which delays economic recovery (Baker et al 2016;Al-Thaqeb et al 2022). A rise in these uncertainties leads to increased market volatility (Baker et al 2019;Liu and Zhang 2015), poor firm performance (Feng et al 2021;Iqbal et al 2020;Trakarnsirinont et al 2023), reduced mergers and acquisitions (Sha et al 2020;Bonaime et al 2018;Lee 2018;Paudyal et al 2021), reduced flow of foreign direct investments (Avom et al 2020;Choi et al 2021;Hsieh et al 2019;Zhou et al 2021), increased cash holdings by firms (Goodell et al 2021;Hankins et al 2020;Javadi et al 2021;Zhao and Niu 2022), reduced firm innovation activities (Lou et al 2022;Cong and Howell 2018). Researchers in the past have focused on political uncertainty and its impact on investment decisions (Elmassri et al 2016;Kong et al 2022;Liu et al 2020;Amore and Minsichilli 2018;Wadhwa and Syamala 2023).…”