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Surprise election for Trump connections

Author

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  • Child, Travers Barclay
  • Massoud, Nadia
  • Schabus, Mario
  • Zhou, Yifan

Abstract

We exploit Donald Trump’s nonpolitical background and surprise election victory to identify the value of sudden presidential ties among S&P 500 firms. In our setting firms did not choose to become politically connected, so we identify treatment effects comparatively free of selection bias prevalent in this literature. Firms with presidential ties enjoyed greater abnormal returns around the 2016 election. Since Trump’s inauguration, connected firms had better performance, received more government contracts, and were less subject to unfavorable regulatory actions. We rule out a number of confounding factors, including industry designation, sensitivity to Republican platforms, campaign finance, and lobbying expenditures.

Suggested Citation

  • Child, Travers Barclay & Massoud, Nadia & Schabus, Mario & Zhou, Yifan, 2021. "Surprise election for Trump connections," Journal of Financial Economics, Elsevier, vol. 140(2), pages 676-697.
    • Handle: RePEc:eee:jfinec:v:140:y:2021:i:2:p:676-697
    DOI: 10.1016/j.jfineco.2020.12.004
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    10. Masanori Orihara, 2023. "Election-Day Market Reactions to Tax Proposals: Evidence from a Close Vote," Working Papers 2219, Waseda University, Faculty of Political Science and Economics.
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    More about this item

    Keywords

    Political connections; Event study; Firm performance; Donald Trump;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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