Presidential Power and Shareholder Wealth

43 Pages Posted: 2 Mar 2018 Last revised: 17 Sep 2018

See all articles by Travers Child

Travers Child

China Europe International Business School (CEIBS)

Nadia Massoud

Melbourne Business School, University of Melbourne

Mario Schabus

University of Melbourne

Yifan Zhou

University of Melbourne

Date Written: September 11, 2018

Abstract

We identify a novel channel of political influence by studying network ties to Donald J. Trump prior to his 2016 election campaign. We exploit the combination of Trump’s non-political background together with his widely unexpected election results to identify the value of sudden connectedness to the US President. Trump-connected firms had significantly higher abnormal stock returns around the 2016 presidential election than their nonconnected counterparts. Additionally, we show that subsequent disconnection from the Trump administration destroyed firm value. Since Trump’s inauguration, connected firms have had better performance; were more likely to receive government procurement contracts; and were less subject to unfavorable regulatory actions. We rule out a number of factors potentially confounding our estimation.

Keywords: Political connections, event study, firm performance, regulation, procurement, Donald Trump

JEL Classification: G14, P16, H5

Suggested Citation

Child, Travers and Massoud, Nadia and Schabus, Mario and Zhou, Yifan, Presidential Power and Shareholder Wealth (September 11, 2018). Available at SSRN: https://ssrn.com/abstract=3125228 or http://dx.doi.org/10.2139/ssrn.3125228

Travers Child

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

Nadia Massoud (Contact Author)

Melbourne Business School, University of Melbourne ( email )

200 Leicester Street
Carlton, Victoria 3053 3186
Australia
+61 3 9349 8130 (Phone)
+61 3 9349 8136 (Fax)

HOME PAGE: http://mbs.edu/facultyresearch/facultydirectory/Pages/NadiaMassoud.aspx

Mario Schabus

University of Melbourne ( email )

Victoria, 3010
Australia

Yifan Zhou

University of Melbourne ( email )

Department of Finance
Level 12, 198 Berkeley St
Carlton, VIC 3053
Australia

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