State-level politics: do they influence corporate investment decisions?

Paresh Kumar Narayan, Seema Narayan, Vuong Thao Tran, Kannan Thuraisamy

Research output: Contribution to journalArticleResearchpeer-review

Abstract

Motivated by the real options theory, we develop the hypothesis that political outcomes (POs) influence corporate investment (CI). We show that POs influence CI strongly when a sample of all 1331 Australian firms are modelled as a panel. The effect of POs on CI at the Australian state-level is heterogenous with some states more affected than others and with some PO variables more influential than others. We also confirm that when confronted with a large sample of firms, firm characteristics such as political connections, size and capital intensity do matter in terms of whether POs influence CI.

Original languageEnglish
Article number101708
Number of pages15
JournalInternational Review of Financial Analysis
Volume74
DOIs
Publication statusPublished - Mar 2021

Keywords

  • Australia
  • Corporate investment
  • Political outcomes

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