Corporate PACs and the Stock Market: The Case of the 2004 Presidential Election

Document Type

Article

Publication Date

1-1-2008

School

Finance

Abstract

The 2004 U.S. presidential election was very close. Rumors from exit polls on Election Day showed that John Kerry would likely win, but the actual vote counts revealed on Tuesday night and early Wednesday morning showed that George Bush had been re-elected. This sets up a natural experiment for studying the shareholder-wealth impact of rumor and eventual outcome of election on firms which made an investment in public policy through PAC donations. The authors find that the stock of companies whose PAC contributions favored Democrats performed better on Tuesday and those that favored Republicans performed better on Wednesday. In general, most S&P 500 companies appear to have favored the Republican victory with both their PAC donations and by the reaction of their stock price to election results.

Publication Title

Journal of Wealth Management

Volume

11

Issue

2

First Page

93

Last Page

103

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