Political geography and stock returns: The value and risk implications of proximity to political power

Kim, Chansog; Pantzalis, Christos; Park, Jung Chul

doi:10.1016/j.jfineco.2012.05.007

Cited by 218 publications

(182 citation statements)

References 91 publications

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“…Kim et al. () measure uncertainty about future policies for different areas of the political map. Their proxy for policy uncertainty is constructed after general elections held every two years in the US using the degree of different state politicians’ partisan alignment with the incumbent president (a measure they label as political alignment index or PAI ).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…We argue that legislators often draft, sponsor, and/or amend bills with an eye on firms located in the geographic area that constitutes their political home, especially those firms with whom they are connected (Roberts, ; Jayachandran, ). This legislative activity creates uncertainty regarding the redistribution of future growth opportunities among firms within an industry and/or a state and can generate the perception of higher risk among investors (Kim et al., ).…”

Section: Data Selection and Variable Descriptionmentioning

confidence: 99%

“…Since political uncertainty can take many different forms, we choose to focus on the type of uncertainty about future cash flows that emanates from legislative activity (i.e., policy uncertainty) . Policy uncertainty implies that there is a greater array of both threats and opportunities for affected firms (Kim, Pantzalis, and Park, ). We proxy policy uncertainty here by the number of bills that have the potential to affect a firm's future business landscape.…”

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confidence: 99%

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Policy Uncertainty and the Dual Role of Corporate Political Strategies

Kim¹,

Kim²,

Pantzalis³

et al. 2018

Financial Management

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Firms use active political strategies not only to mitigate uncertainty emanating from legislative activity, but also to enhance their growth opportunities. We find that a firm's systematic risk (beta) can be hedged away by employing various political strategies involving the presence of former politicians on corporate boards of directors, contributions to political campaigns, and corporate lobbying activities. The hedging effect is greater when firms operate in more uncertain industries. In addition, active political strategies are associated with greater firm heterogeneity and make real options more value relevant as potential drivers of competitive advantages in uncertain environments.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Section: Data Selection and Variable Descriptionmentioning

confidence: 99%

mentioning

confidence: 99%

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Policy Uncertainty and the Dual Role of Corporate Political Strategies

Kim¹,

Kim²,

Pantzalis³

et al. 2018

Financial Management

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“…Moreover, clearer policy risk can help corporations lower the cost caused by asymmetric information, which affects market performance and behaviour. Kim, Pantzalis and Park (2012) analyse American firms by using the percentage of each state's leading politicians within the president's party as the proxy for political geography. The authors find that the corporations in high political geography usually had higher stock returns.…”

Section: Theoretical Analysis and Hypothesis Developmentmentioning

confidence: 99%

“…In the western literature, proximity to political power is measured by the percentage of the state's officers belonging to the president's party (Kim, Pantzalis, and Park 2012). In China, the single party makes the political geography more invisible than and different from the western countries.…”

Section: Political Geographymentioning

confidence: 99%

Firm location, political geography and environmental information disclosure

Yao

Liang

2016

Applied Economics

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As the subjective and objective factors that influence corporate behaviours, political region and firm location are of great importance to environmental information disclosure (EID). With spatial and political geography as a research perspective, this article makes a study by using the samples of manufacturing listed companies from 2009 to 2011. As a result, we determine that regulatory distance and political geography had negative effects on EID, while political geography weakens regulatory distance's function. After considering an enterprise's administrative rank, we determined that when the rank is higher, regulatory distance has negative effects on EID; when the rank is lower, the effects are the opposite. Regarding political geography, it always weakened the regulatory distance's function. Moreover, the effects are significant only when the enterprises had low governmental regulation. The study shows the effects that firm location and political geography have made on EID. At the same time, this study also gives theoretical and empirical evidence to the necessity of raising governmental regulatory effectiveness.

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Governmental unity and corporate performance

Cheng

2022

J Corp Accounting Finance

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This paper examines the impact of governmental unity on corporate performance. Calendar years are classified as united when the president, Senate majority, and House majority are all from the same political party. Results indicate that firms have higher accounting return on assets when the federal government is united than when it is not. Firms have higher accounting return on assets when federal and state governments are both united under the same party, though the structures of federal and state governments may differ in the same time episode. The positive effect of government unity on corporate performance is stronger when the firm's sales growth rate is greater and profitability more volatile. The results are consistent with united government promoting legislation efficiency and reducing uncertainty in political environments.

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Political geography and stock returns: The value and risk implications of proximity to political power

Cited by 218 publications

References 91 publications

Policy Uncertainty and the Dual Role of Corporate Political Strategies

Policy Uncertainty and the Dual Role of Corporate Political Strategies

Firm location, political geography and environmental information disclosure

Governmental unity and corporate performance

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