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Campaign contributions and share price

Filed in archive strategy by leon on November 07, 2006

Campaign contributions and share price
Fascinating study from three academics looking at the relationship between politicallinks contributions and stock price. Michael Cooper from the University of Utah and Huseyin Gulen and Alexei Ovtchinnikov, both from Virginia Tech, found that slinging cash to politicians improves returns!

The study Corporate Political Contributions and Stock Returns found that the share price performance of companies that contributed to the largest number of congressional candidates was better than those of other companies. The bigger the spread of candidates, the better the returns.

"If a firm increases the number of supported candidates by about 96 candidates, it will experience an increase in annual returns of approximately six per cent,'' the researchers said.

They cannot say exactly how the contributions increase the bottom line. But they make the point that potential ways could include favourable tax treatment or credits, government contracts, imposing tariffs or penalties on competitors and favourable regulatory requirements.

"Given that out study involves literally hundreds of thousands of individual contributions, it is not practical to trace through all the possible legislation that may affect firm returns,'' they say.

Still, one could only imagine.

Significantly, the study finds that the defence, tobacco, aircraft, automobile and oil industries tend to hold the largest portfolios of supported candidates.

And although Republicans receive more contributions, the contribution effect is stronger for firm contributions to Democrats.






Permalink: Campaign contributions and share price
Tags: political  contributions  stock  price  contributions  corporate  share+price  contributions+share  campaign 

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