“Presidential Power and Shareholder Wealth” by Dr. Mario Schabus
Dr. Mario Schabus
Senior Lecturer in Accounting
Faculty of Business and Economics
The University of Melbourne
We identify a novel channel of political influence by studying network ties to Donald J. Trump prior to his 2016 election campaign. We exploit the combination of Trump’s nonpolitical background together with his widely unexpected election results to identify the value of sudden connectedness to the US President. Trump-connected firms had significantly higher abnormal stock returns around the 2016 presidential election than their nonconnected counterparts. Additionally, we show that subsequent disconnection from the Trump administration destroyed firm value. Since Trump’s inauguration, connected firms have had better performance; were more likely to receive government procurement contracts; and were less subject to unfavorable regulatory actions. We rule out a number of factors potentially confounding our estimation.