Market reaction to political risk: Evidence from the 2018 Brazilian presidential election

Tipo
Artigos

Ano
02/07/2021

Linha de Pesquisa
Administração e Economia de Negócios

Autor(es)
Gustavo M. L. Pereira, Jéfferson A. Colombo, Otavio Figueiredo

Orientador

https://doi.org/10.1080/10978526.2021.1942025


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Latin American Business Review, Vol. ahead-of-print, No. ahead-of-print. Abstract: The 2018 Brazilian presidential elections coupled unprecedented political instability with a close race between two candidates with antagonistic economic agendas. Using this unparalleled scenario, this paper analyzes the role of political events in shaping the returns on financial assets. The regressions using the Propensity Score Matching technique suggest that companies linked to the government had positive cumulative abnormal returns around relevant events compared with otherwise identical firms. These results reinforce the role of political risk on financial markets in emerging economies and allow economic agents to outline strategies to predict stock return behavior during periods of political turmoil.

Keywords: Electoral risk, Event study, Political risk, Propensity score matching, State control, Stock return.

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