TY - JOUR
T1 - Betting on presidential elections
T2 - Should we buy stocks connected with the winning party?
AU - Shen, Chung Hua
AU - Lin, Chih-Yung
PY - 2015/5/1
Y1 - 2015/5/1
N2 - This study discusses whether political connection (PC) affects investor trading decisions. We approach the issue by examining the equity share trading of foreign investors, insiders, and individual investors, and the stock returns of politically connected firms in the 2008 Taiwanese presidential election. We classified investors into two categories, namely, more PC-based and less PC-based investors. More PC-based investors invest more in firms connected with the winning party and obtain higher abnormal returns, whereas the opposite holds for less PC-based investors. We posit that foreign investors are more PC-based, whereas insiders and individual investors are less PC-based. Evidence suggests that PC is influential in the trading decisions of investors.
AB - This study discusses whether political connection (PC) affects investor trading decisions. We approach the issue by examining the equity share trading of foreign investors, insiders, and individual investors, and the stock returns of politically connected firms in the 2008 Taiwanese presidential election. We classified investors into two categories, namely, more PC-based and less PC-based investors. More PC-based investors invest more in firms connected with the winning party and obtain higher abnormal returns, whereas the opposite holds for less PC-based investors. We posit that foreign investors are more PC-based, whereas insiders and individual investors are less PC-based. Evidence suggests that PC is influential in the trading decisions of investors.
KW - Firm value
KW - PC-based investors
KW - Political connection
KW - Trading decision
UR - http://www.scopus.com/inward/record.url?scp=84928770618&partnerID=8YFLogxK
U2 - 10.1016/j.qref.2014.09.007
DO - 10.1016/j.qref.2014.09.007
M3 - Article
AN - SCOPUS:84928770618
SN - 1062-9769
VL - 56
SP - 98
EP - 109
JO - Quarterly Review of Economics and Finance
JF - Quarterly Review of Economics and Finance
ER -