Student: HUANG Lijing / BBA Advisor: ZHANG Michael / ISOM
Some previous studies have concluded that political contributions bring positive financial outcomes on a firm-specific basis. Claessens, Feijen and Laeven examined Brazilian firms around the 1998 and 2002 elections and found that firms that contributed to elected members generated higher stock returns and received significant bank financing. This indicates political connections may bring better access to bank finance. Cooper, Gulen and Ovtchinnikov examined 1,258 US firms from 1979 to the 2004 elections and found firms contributing to the largest number of Congressional candidates generated a significant six per cent a year higher stock return than other firms. The cause of the difference was not studied, but Cooper and others listed favorable tax treatment and/or credits, the awarding of government contracts, the imposing of tariffs or other penalties on competitors, and the implementation of favorable regulatory requirements as possible contributors to the effect.
The data can also be looked at from an industry perspective and is the approach used in this project. Most previous studies have been done on a firm-specific basis. This makes it easier to quantify the results as each firm’s stock returns and political connections are easily traceable. However, logically, it is hard to imagine how such political connections can significantly increase a single firm’s returns, especially in a well-regulated economy.
09.SU.SB.011
09.SU.SB.012
F inancial Outcomes of Political Contributions
Student: KANG Jiayin / MAEC Advisor: ZHANG Michael / ISOM
The ARIMA model is a good way to examine time series data. Here, R is used to build an ARIMA model to forecast future value, providing a good indicator for election results.
In general, election results show a positive correlation between search volume and election result trends and between donation and election result trends for each candidate. The study therefore involves correlation and regression analysis of search volume data, donation data, and simulated stock value for each candidate.
Intuitively, a donation for Obama in the 2008 US presidential election implies a slight decrease in the simulated stock value for his opponent McCain. The question also arises as to whether an increase in the search volume for Obama will lead to a decrease or increase in election trends for McCain. The research thus carries out some cross-tests of search volume, donations, and simulated stock value for Obama, McCain, Clinton, and Romney through regression and correlation analysis.
F inancial Outcomes of Political Contributions
Student: KONG Lingbing / GBUS Advisor: ZHANG Michael / ISOM
The study seeks to find out whether money from corporations can buy political influence on a regular basis. The original idea was to locate companies that made donations in the 2008 presidential election, and try to relate their donations to future financial performance. However, as regulations prevent firms from donating to candidates, the data used relates instead to individual contributions. Working on the assumption that the political stance of the company head can reflect the firm’s political direction, the individuals targeted are chairmen, CEOs or company presidents.
09.SU.SB.013
09.SU.SB.014
F inancial Outcomes of Political Contributions
Student: SHI Zhaofang / BBA Advisor: ZHANG Michael / ISOM
This research project analyzes the relationship between companies’ financial performance and their investment in open-source software. Open-source computer software provides free access to its source code, allowing people to use, change and redistribute it in modified or unmodified forms.
The project starts by looking at major events in 75 famous American IT companies in relation to open-source software. After the first round of selection, 358 related news items were chosen. It was found 51 of the 75 companies had little interaction with open-source software. The second round of selection, based on the first round, saw 171 information items for 16 IT companies selected. This indicates that only a few companies have interaction with open-source software. These IT companies include software developers and vendors, networking technology and service providers, microprocessors makers, hardware developers, and providers offering multiple technology and services.
F inancial Outcomes of Political Contributions
Student: XU Zhiji / MAEC Advisor: ZHANG Michael / ISOM
The profitability of corporate political activity has been debated for many years. Some researchers believe that corporate political activity is a kind of investment, leading to positive returns. Others oppose this view, seeing political donations as a form of perquisites consumption for a firm’s managers which may damage company returns.
This project examines the relation between political donations and financial outcomes. It studies how political donations by company officials in the 2008 presidential campaign may affect stock performance when the result is announced. This is a first-step analysis of political donations made by individuals in the US.
09.SU.SB.015
F inancial Outcomes of Political Contributions
Student: ZHANG Tong / BBA Advisor: ZHANG Michael / ISOM
This study focuses on the relationship between individual donations from company staff and the benefit the company receives during and after a presidential election. On the one hand, it could be a positive relationship since staff, especially high-profile members such as CEOs, may act on behalf of shareholders.
On the other hand, there could be an agency problem, that is, the policies of the candidate receiving the donation may be unfavorable to the company or industry but beneficial to the donor. In this case, the donor donates for personal reasons. It is also possible that there is no apparent relationship between the political donation of a private donor and the effects that the future policy of a presidential candidate may have on the company or industry in which the donor works.