The partisan policy cycle and firm valuation

Our research probes the firm valuation impact of partisan-motivated policy cycles. We first identify the micro-channels of policy transmission that link partisan policy disturbances to firm value. Then, we draw on firm-level data from 21 industrial democracies for the period extending from 1989 to 2008 to examine whether government partisanship has any distinct impact on firm value. We identify a surprisingly large and consistent positive relationship of left-oriented governments with firm value. Additionally, our research finds that the partisan impact on firm value is appreciably conditioned by factors like economic openness.

► We examine the impact of government partisanship on firm valuation. ► Firm valuation differs under governments of different partisan stripes. ► Firm value is higher under left-wing governments than under right-wing governments. ► Institutional and structural factors mitigate the partisan impact on firm value.