The impact of political uncertainty on institutional ownership

Bill B. Francis, Iftekhar Hasan and Yun Zhu

Journal of Financial Stability, 2021, vol. 57, issue C

Abstract: This paper provides original evidence from institutional investors that political uncertainty greatly affects investment behavior. Using institutional holdings of common stock, we find that institutions significantly reduce their holdings by 0.8–2.3% points during presidential election years. Such effect holds for gubernatorial elections with cross-state-border difference-in-difference analysis and for tests using a political uncertainty index. The effect is the opposite for American Depository Receipts (ADRs). In addition, we find that institutions benefit financially from the observed strategy, and such strategy is in line with predicted outcomes of presidential election polls.

Keywords: Political uncertainty; Presidential election; Gubernatorial election; Institutional investor; Investment (search for similar items in EconPapers)
JEL-codes: G23 G28 P16 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: The impact of political uncertainty on institutional ownership (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:57:y:2021:i:c:s1572308921000802

DOI: 10.1016/j.jfs.2021.100921

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