The impact of political majorities on firm value: Do electoral promises or friendship connections matter?

Abstract

International audienceThis 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

The Effect of Political Connections on the Firm Performance in a Newly Democratised Country

“…The coefficients associated with the political connections variable are positive and statistically significant. The positive association between performance and political connections has been proved by Ang et al 2013;Goldman et al 2009;Coulomb and Sangnier 2014;Ding et al 2014 andLi et al 2008. Similarly, these results are consistent with the theoretical predictions.…”

“…Indeed, this impact has appealed the attention of several studies around the world. Among the ones who have found a positive effect we can cite (Faccio 2006 ;Goldman et al 2009 ;Boubakri et al 2012 ;Ang et al 2013 ;Coulomb and Sangnier 2014 ;Ding et al 2014 ;Ling et al 2016 ;Rijkers et al 2017). On the other hand, some others have found a negative effect such as Fisman 2001;Roberts 1990, Faccio and Parsley 2009, Faccio 2010Saeed et al 2015.…”

Local political business cycles: Evidence from Philippine municipalities

“…Specifically, voters evaluate incumbents according to economic performance (Lewis-Beck and Paldam, 2000), and incumbents have the ability to affect economic outcomes (Coulomb and Sangnier, 2014;Snowberg et al, 2007a, b). Yet, researchers have been able to identify only moderate cycles in economic policies and, at best, weak cycles in real outcomes (Franzese, 2002).…”

The value of the revolving door: Political appointees and the stock market

“…Event studies document large effects of policy platforms (Knight, 2007;Coulomb and Sangnier, 2014) and even secrete policy decisions (Dube et al, 2011) on the fortune of affected firms. Political connections may be important for firms in this respect and allow them to influence policies in their favor -at least in countries with weak institutions.…”