Public Choice

, Volume 156, Issue 1–2, pp 285–307 | Cite as

Corporate campaign contributions and abnormal stock returns after presidential elections

  • Jürgen HuberEmail author
  • Michael Kirchler


Contributions by investor-owned companies play major roles in financing the campaigns of candidates for elective office in the United States. We look at the presidential level and analyze contributions by companies before an election and their stock market performance following US presidential elections from 1992 to 2004. We find that companies experienced abnormal positive post-election returns with (i) a higher percentage of contributions given to the eventual winner and (ii) with a higher total contribution given. Hypothetical portfolios of the 30 largest corporate contributors formed according to (i) the percentage of contributions given to the winner in a presidential election and (ii) the total contribution (divided by market capitalization) would have earned significant abnormal returns in the two years after an election. While all results hold for Bill Clinton and George W. Bush, they are stronger by a magnitude of two to three under W. Bush.


Presidential election Corporate campaign contributions Abnormal returns 

JEL Classification

D72 G10 P16 



We thank Michael Hanke, Florian Hauser, Thomas Stöckl, Shyam Sunder, and participants at seminars at the University of Innsbruck and at Yale University for helpful comments. We would also like to thank the Editor and two anonymous referees for very helpful comments and suggestions. Daniel Kleinlercher provided excellent research assistance.


  1. Aggarwal, R., Meschke, F., & Wang, T. (2007). Corporate political contributions: investment or agency? Google Scholar
  2. Alesina, A., & Roubini, N. (1992). Political cycles in OECD economies. Review of Economic Studies, 59(4), 663–688. CrossRefGoogle Scholar
  3. Ansolabehere, S., de Figueiredo, J., & Snyder, J. M. (2003). Why is there so little money in us politics? Journal of Economic Perspectives, 17(1), 105–130. CrossRefGoogle Scholar
  4. Ariel, R. A. (1990). High stock returns before holidays: existence and evidence on possible causes. The Journal of Finance, 45(5), 1611–1626. CrossRefGoogle Scholar
  5. Austen-Smith, D. (1987). Interest groups, campaign contributions and probabilistic voting. Public Choice, 54, 123–139. CrossRefGoogle Scholar
  6. Bronars, S., & Lott, J. (1997). Do campaign donations alter how a politician votes? Or, do donors support candidates who value the same things? Journal of Law and Economics, 40, 317–350. CrossRefGoogle Scholar
  7. Carhart, M. M. (1997). On persistence in mutual fund performance. The Journal of Finance, 52(1), 57–82. CrossRefGoogle Scholar
  8. Coate, S. (2004). Political competition with campaign contributions and informative advertising. Journal of the European Economic Association, 2(5), 772–804. CrossRefGoogle Scholar
  9. Cooper, M., Gulen, H., & Ovtchinnikov, A. (2008). Corporate political contributions and stock returns (Working Paper). Google Scholar
  10. Daniel, K., & Lott, J. (1997). Term limits and electoral competitiveness: evidence from California’s state legislative races. Public Choice, 90, 165–184. CrossRefGoogle Scholar
  11. Edmans, A., Garcia, D., & Norli, O. (2007). Sports sentiment and stock returns. The Journal of Finance, 62(4), 1967–1998. CrossRefGoogle Scholar
  12. Erikson, R. (1989). Economic conditions and the presidential vote. American Political Science Review, 83(4), 567–573. CrossRefGoogle Scholar
  13. Fair, R. (1988). The effect of economic events on votes for president: 1984 update. Political Behavior, 10(2), 168–179. CrossRefGoogle Scholar
  14. Fama, E. F. (1970). Efficient capital markets: a review of theory and empirical work. The Journal of Finance, 45, 383–417. CrossRefGoogle Scholar
  15. Fama, E. F. (1991). Efficient capital markets 2. The Journal of Finance, 66, 1575–1616. CrossRefGoogle Scholar
  16. Fama, E. F. (1998). Market efficiency, long-term returns, and behavioural finance. Journal of Financial Economics, 49, 283–306. CrossRefGoogle Scholar
  17. Fama, E. F., & French, K. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33(1), 3–56. CrossRefGoogle Scholar
  18. Goldman, E., Rocholl, J., & So, J. (2009). Do politically connected boards affect firm value? Review of Financial Studies, 22, 2331–2360. CrossRefGoogle Scholar
  19. Grier, K., & Munger, M. (1994). The determinants of industrial political activity 1978–1986. American Political Science Review, 88, 911–926. CrossRefGoogle Scholar
  20. Grossman, G., & Helpman, E. (1994). Protection for sale. American Economic Review, 84(4), 833–850. Google Scholar
  21. Grossman, G., & Helpman, E. (1996). Electoral competition and special interest policy. Review of Economic Studies, 63(2), 265–286. CrossRefGoogle Scholar
  22. Hart, D. (2001). Why do some firms give? Why do some give a lot? High-tech PACs, 1977–1996. Journal of Politics, 63, 1230–1249. Google Scholar
  23. Herron, M., Lavin, J., Cram, D., & Silver, J. (1999). Measurement of political effects in the united states economy: a study of the 1992 presidential election. Economics & Politics, 11(1), 51–81. CrossRefGoogle Scholar
  24. Hibbs, D. (1987). The American political economy: electoral policy and macroeconomics in contemporary America. Cambridge: Harvard University Press. Google Scholar
  25. Jayachandran, S. (2006). The Jeffords effect. Journal of Law and Economics, 49(2), 397–425. CrossRefGoogle Scholar
  26. Jegadeesh, N., & Titman, S. (1993). Returns to buying winners and selling losers: implications for stock market efficiency. The Journal of Finance, 48(1), 65–91. CrossRefGoogle Scholar
  27. Kim, C.-W., & Park, J. (1994). Holiday effects and stock returns: further evidence. Journal of Financial and Quantitative Analysis, 29(1), 145–157. CrossRefGoogle Scholar
  28. Knight, B. (2006). Are policy platforms capitalized into equity prices? Evidence from the bush/gore 2000 presidential election. Journal of Public Economics, 90(4–5), 751–773. CrossRefGoogle Scholar
  29. Kohli, R. K., & Kohers, T. (1992). The week-of-the-month effect in stock returns: the evidence from the S&P composite index. Journal of Economics and Finance, 16, 129–137. CrossRefGoogle Scholar
  30. Krueger, A. (1974). The political economy of the rent-seeking society. American Economic Review, 64, 291–303. Google Scholar
  31. Lakonishok, J., & Smidt, S. (1988). Are seasonal anomalies real? A ninety-year perspective. Review of Financial Studies, 1(4), 403–425. CrossRefGoogle Scholar
  32. Lintner, J. (1965). The valuation of risk assets and the selection of risky investment in stock portfolios and capital budgets. Review of Economics and Statistics, 47(1), 13–37. CrossRefGoogle Scholar
  33. Lott, J. (2000). A simple explanation for why campaign expenditures are increasing: the government is getting bigger. Journal of Law and Economics, 43(2), 359–393. CrossRefGoogle Scholar
  34. Lott, J. (2006). Campaign finance reform and electoral competition. Public Choice, 129(3), 263–300. CrossRefGoogle Scholar
  35. Malkiel, B. G. (2003). The efficient market hypothesis and its critics. Journal of Economic Perspectives, 17, 59–83. CrossRefGoogle Scholar
  36. Maniadis, Z. (2009). Campaign contributions as a commitment device. Public Choice, 139(3), 301–315. CrossRefGoogle Scholar
  37. Marquering, W., Nisser, J., & Valla, T. (2006). Disappearing anomalies: a dynamic analysis of the persistence of anomalies. Applied Financial Economics, 16(4), 291–302. CrossRefGoogle Scholar
  38. Mitchell, M. L., & Stafford, E. (2000). Managerial decisions and long-term stock price performance. Journal of Business, 73(3), 287–329. CrossRefGoogle Scholar
  39. Mueller, D. (2003). Public choice III. Cambridge: Cambridge University Press. CrossRefGoogle Scholar
  40. Mueller, D., & Stratmann, T. (1994). Informative and persuasive campaigning. Public Choice, 81, 55–77. CrossRefGoogle Scholar
  41. Nelson, J. A. (2000). The supply and demand of campaign finance reform. Columbia Law Review, 100(2), 524–557. CrossRefGoogle Scholar
  42. Nofsinger, J. R. (2007). The stock market and political cycles. Journal of Socio-Economics, 36(5), 734–744. CrossRefGoogle Scholar
  43. Nordhaus, W. (1975). The political business cycle. Review of Economic Studies, 42(2), 169–190. CrossRefGoogle Scholar
  44. Office of Management and Budget, Executive Office of the President (2011). URL:
  45. Pittman, R. (1988). Rent-seeking and market structure: comment. Public Choice, 58, 173–186. CrossRefGoogle Scholar
  46. Prat, A. (2002). Campaign spending with office-seeking politicians, rational voters, and multiple lobbies. Journal of Economic Theory, 103, 162–189. CrossRefGoogle Scholar
  47. Roberts, B. E. (1990). Political institutions, policy expectations, and the 1980 election: a financial market perspective. American Journal of Political Science, 34(2), 289–310. CrossRefGoogle Scholar
  48. Rogoff, K. (1990). Equilibrium political budget cycles. American Economic Review, 80(1), 21–36. Google Scholar
  49. Santa-Clara, P., & Valkanov, R. (2003). The presidential puzzle: political cycles and the stock market. The Journal of Finance, 58, 1841–1872. CrossRefGoogle Scholar
  50. Schwert, W. (1981). Using financial data to measure effects of regulation. Journal of Law and Economics, 24(1), 121–158. CrossRefGoogle Scholar
  51. Sharpe, W. (1964). Capital asset prices: a theory of market equilibrium under conditions of risk. The Journal of Finance, 19(3), 425–442. Google Scholar
  52. Stratmann, T. (2002). Can special interests buy congressional votes? Evidence from financial services legislation. Journal of Law and Economics, 41(3), 85–113. Google Scholar
  53. Stratmann, T. (2005). Some talk: money in politics. A (partial) review of the literature. Public Choice, 124(1), 135–156. CrossRefGoogle Scholar
  54. Stratmann, T., & Aparicio-Castillo, F. (2006). Competition policy for elections: do campaign contribution limits matter? Public Choice, 127(1), 177–206. CrossRefGoogle Scholar
  55. Tullock, G. (1967). The welfare costs of tariffs, monopolies, and theft. Western Economic Journal, 5, 224–232. Google Scholar
  56. von Hayek, F. A. (1945). The use of knowledge in society. American Economic Review, 35(4), 519–530. Google Scholar
  57. Zardkoohi, A. (1988). Market structure and campaign contributions: does concentration matter? A reply. Public Choice, 58, 187–191. CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Department of Banking and FinanceUniversity of InnsbruckInnsbruckAustria

Personalised recommendations