Presidential Power and Stock Returns

Youngsoo Kim () and Jung Chul Park ()
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Youngsoo Kim: University of Regina
Jung Chul Park: University of South Florida

No 8710820, Proceedings of International Academic Conferences from International Institute of Social and Economic Sciences

Abstract: Recent studies highlight positive effect of political connections on firm performance and stock returns. This paper shows that the positive effect of political connections on the cross-sectional stock returns disappears in the weak presidency period, defined as the last two years before the presidential party change, or period of low job approval ratings. The extent of the presidential party?s control over the Congress does not affect our main result. The result is driven by small firms, who typically do not have financial resources to hedge away political risks, and by the firms located in the states where residents more strongly support the president. Additional test suggests that the industries that rely on heavy government expenditure use a variety of political strategies to maintain the value of their political capital even during the weak presidency period.

Keywords: Political geography; political connections; policy risk; returns; performance; Presidential Power; Presidential job approval rating (search for similar items in EconPapers)
JEL-codes: G10 G11 G14 (search for similar items in EconPapers)
Pages: 1 page
Date: 2019-07
New Economics Papers: this item is included in nep-pol and nep-rmg
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Published in Proceedings of the Proceedings of the 48th International Academic Conference, Copenhagen, Jul 2019, pages 86-86

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Persistent link: https://EconPapers.repec.org/RePEc:sek:iacpro:8710820

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