Elections and Political Risk: New Evidence from the 2008 Taiwanese Presidential Election
We examine the effects of party platforms on the economic opportunities of firms using a unique data set from a political prediction market in Taiwan, a country with two dominant parties whose political cleavage derives mainly from a single issue: the “One China Principle”. We find that during the 2008 Presidential campaign, the share price of Taiwanese firms with investments in the mainland responded strongly and positively to a positive electoral outlook for the KMT, the party which advocates lifting caps on cross-strait investment in mainland China. The response is strongest for those firms who have already hit their caps.
© 2011 Elsevier B.V.
Masami Imai, Cameron A. Shelton, Elections and political risk: New evidence from the 2008 Taiwanese Presidential Election, Journal of Public Economics, Volume 95, Issues 7–8, August 2011, Pages 837-849, ISSN 0047-2727, 10.1016/j.jpubeco.2010.12.009. (http://www.sciencedirect.com/science/article/pii/S0047272711000053)