http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1349267
Abstract:
We document cycles in corporate investment corresponding with the timing of
national elections around the world. During election years, firms reduce
investment expenditures by an average of 4.8% relative to non-election years
, controlling for growth opportunities and economic conditions. The
magnitude of the investment cycles varies with different country and
election characteristics. We investigate several potential explanations and
find evidence supporting the hypothesis that political uncertainty leads
firms to reduce investment expenditures until the electoral uncertainty is
resolved. These findings suggest that political uncertainty is an important
channel through which the political process affects real economic outcomes.
