 Political uncertainty and Stock returns: Evidence from the Brazilian Political CrisisDavid Hillier and Tiago Loncan Pacific-Basin Finance Journal, 2019, vol. 54, issue C, 1-12 Abstract: This paper examines the effect of political uncertainty on stock returns, exploiting an exogenous shock to political stability in Brazil. In May 2017, a conversation between Brazil's President and a businessman was bugged by Brazilian Police and leaked to the media. This led to sudden political instability and a collapse in the equity market. We decompose the cross-sectional variation of abnormal returns around this event and investigate whether corporate political connections and exposure to foreign capital were factors in the price falls. Our results show that firms connected with the Brazilian state-owned development bank, BNDES, and firms cross-listed via ADRs (American Depositary Receipts) were most affected by this shock. The evidence suggests that political connections and foreign capital exposure are factors in channeling political risk to asset prices, increasing the cost of equity capital during periods of political instability. Keywords: Political uncertainty; Stock returns; Corporate political connections; Foreign capital (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:54:y:2019:i:c:p:1-12 DOI: 10.1016/j.pacfin.2019.01.004 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.