Work

Political Uncertainty and Corporate Investment Cycles

Year: 2012

Type: article

Abstract: ABSTRACT We document cycles in corporate investment corresponding with the timing of national elections around the world. During election years, firms reduce investment expenditures by an average of 4.8% relative to nonelection years, controlling for growth opportunities and economic conditions. The magnitude of the investment cycles varies with different country and election characteristics. We investigate several potential explanations and find evidence supporting the hypothesis that political uncertainty leads firms to reduce investment expenditures until the electoral uncertainty is resolved. These findings suggest that political uncertainty is an important channel through which the political process affects real economic outcomes.

Source: The Journal of Finance

DOI: 10.1111/j.1540-6261.2011.01707.x

Authors: BRANDON JULIO, YOUNGSUK YOOK

Institutions: University of North Carolina at Chapel Hill, Hong Kong Polytechnic University, Nanyang Technological University, Georgetown University, Sungkyunkwan University

Language: English

Topic: Corporate Finance and Governance

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: bronze

OpenAlex ID: W3125217951

FWCI: 67

Cites: 66

Cited by: 2,271

Related to: 10