Title

Elections and Political Risk: New Evidence from the 2008 Taiwanese Presidential Election

Document Type

Article

Department

Economics (CMC)

Publication Date

2011

Abstract

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.

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© 2011 Elsevier B.V.

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