Surprise Election for Trump Connections
22 Pages Posted: 2 Mar 2018 Last revised: 6 Sep 2022
Date Written: April 24, 2020
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.
Keywords: political connections, event study, firm performance, Donald Trump
JEL Classification: G1, G3, H57, D7, P16
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