Politics, State Ownership, and Corporate Investments

Alok, S and Ayyagari, M (2020) Politics, State Ownership, and Corporate Investments. The Review of Financial Studies, 33 (7). pp. 3031-3087. ISSN 0893-9454

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We document a political cycle in the investment decisions of state-owned enterprises (SOEs) by using the constitutionally mandated election schedule in India as a source of exogenous variation in politicians’ incentive to cater to voters. Using a project-level investment database, we find that SOEs announce more capital expenditure projects in election years, especially in infrastructure, and in districts with close elections, high-ranking politicians, and left-wing incumbents. SOE projects in election years have negative announcement returns, suggesting a loss in shareholder value

Item Type: Article
Subjects: Financial Management
Date Deposited: 06 Jul 2023 07:52
Last Modified: 06 Jul 2023 07:53
URI: https://eprints.exchange.isb.edu/id/eprint/1728

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