Political Investment Cycle of State-Owned Enterprises
62 Pages Posted: 15 Nov 2016 Last revised: 17 Apr 2019
Date Written: July 27, 2016
Abstract
Using a large panel of more than 140,000 state-owned enterprises (SOEs), this study examines SOEs’ investment behavior surrounding 82 national elections in 25 European countries between 2001 and 2015. We find that SOEs increase their corporate investment by about 29% of the sample average during national election years. This effect is more pronounced in fixed timing and closely contested elections. The effect is also stronger in countries with low institutional quality, more centralized political systems and state-controlled banking systems. In contrast, we find the matched non-SOEs decrease their corporate investment significantly during national election years. (JEL G18, G30, G32, E22)
Keywords: State-owned enterprises, Investment, Elections, State-owned banks, Political risks
JEL Classification: G18, G30, G32, E22
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