Elections and Corporate Investment Cycles: What Role Is Played By Geopolitical Risk?

As Wednesday approaches and the race to the White House remains tight (save one poll), the ways in which business adapts to new administrations are varied. We can see the Trump trade beginning to fade with the prospect of a Harris win (weaker dollar, lower treasury yields), but there’s more to it than trades covered in the media.

For example, in this excellent piece that uses some of our ICRG data, the authors document cycles in corporate investment corresponding with the timing of national elections around the world.

What did they find? During election years, firms reduce investment expenditures by an average of 4.8% relative to nonelection years, controlling for growth opportunities and economic conditions. The magnitude of the investment cycles varies with different country and election characteristics.

Several potential explanations are offered, and evidence was found 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.

(https://lnkd.in/eTrqy8KA)

Clearly the main finding is intuitive, but what’s significant for us is that our data continues to be used to yield these exceptional – and useful for valuation and corporate planning – empirical findings.

Much more than a spin on current events.

Our data drives.

The PRS Group: Challenging Borders, Challenging Risk
www.PRSGroup.com
www.christophermckee.net