Political Regimes, Investment and Electoral Uncertainty

Abstract

This study looks at firms’ investment spending in fixed and intangible assets around three types of national elections: presidential, joint presidential, and legislative and parliamentary elections. Investments in fixed assets decline by up to 2% during presidential elections, and 4.44% in joint presidential, and legislative elections. On the other hand, intangible investments decrease by 4.36% in parliamentary election years. Moreover, investment responses to electoral shocks differ markedly within political systems and countries’ institutional settings. Investment levels shift significantly downward in pre- and resume in post-election years. The electoral effect results in a net loss in investment over the election cycle.