Abstract
Investment decision-making in developing countries has largely ignored the role that local electoral politics may play in either encouraging or discouraging long-term investment projects sponsored by foreign firms. Increase in developing country foreign direct investment on the one hand, and trends promoting democratization and competitive elections on the other hand provide an ideal research opportunity to investigate possible investment-election linkages. We do so through development and testing of a framework integrating partisan and opportunistic political business cycle (PBC) theories to predict trends in the count of major investment projects announced in 18 emerging-market countries holding 31 presidential elections from 1987-2000. Consistent with the framework, we find that firms sponsoring major project investments perceive lower investment risk in the form of more investment project announcements as left-wing political incumbents appear more likely to be replaced by right-wing challengers. Sim...
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