Exposure of Firms to European Integration and the Role of National Policy Positions

69 Pages Posted: 16 Dec 2018 Last revised: 21 Feb 2019

See all articles by Timo Plaga

Timo Plaga

Dresden University of Technology - Faculty of Economics and Business Management

Date Written: February 6, 2019

Abstract

This paper uses information from political parties’ election programs to demonstrate how attitudes toward European integration affect domestic firms’ stock performance as indicated by abnormal returns surrounding 91 parliamentary elections in 20 EU countries. Interaction effects between political parties’ policy positions and firm-specific characteristics significantly affect the heterogeneity of stock price responses. Firms’ share of foreign sales and exposure to the tradable sector have a positive, and capital intensity a negative effect on the market response if the elected parties are in favor of European integration. Conversely, if political support of European integration is weak, firm size has a positive effect, whereas the foreign sales ratio is negatively associated with the market response. Controlling for parties’ positions on a set of single-issue categories provides a more nuanced view of the different policy risks than does the broad right-left measure employed in existing studies.

Keywords: European integration, policy positions, stock pricing, elections, event study

JEL Classification: D72, G12, G14, G18, F15, F50

Suggested Citation

Plaga, Timo, Exposure of Firms to European Integration and the Role of National Policy Positions (February 6, 2019). Available at SSRN: https://ssrn.com/abstract=3291510 or http://dx.doi.org/10.2139/ssrn.3291510

Timo Plaga (Contact Author)

Dresden University of Technology - Faculty of Economics and Business Management ( email )

Mommsenstrasse 13
Dresden, D-01062
Germany

HOME PAGE: http://https://tu-dresden.de/bu/wirtschaft/ime/die-professur/beschaeftigte/timo-plaga

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