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Political Uncertainty and Corporate Investment Cycles

By ET

I read this paper from Journal of Finance (2012 Feb issue).  It tells an interesting story: during election years, firms reduce investment expenditures by an average of 4.8% relative to nonelection years, across nations, controlling for growth opportunities and economic conditions.

The authors explained the observation with political uncertainty.  I wonder if more can be done on this. Does political uncertainty affect individual firms or the economy in general? Would these elections also affect end consumers/voters?  There seems to be a lot of interesting questions related to this topic.

One Response to “Political Uncertainty and Corporate Investment Cycles”

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