Non-election Years Research Articles

Local official turnover and bank risk-taking: Evidence from China

This study investigates the impact of turnover among local government officials on the risk-taking of local commercial banks in China. Our findings reveal a positive relationship between official turnover and risk-taking in banks. The observed effect is mainly due to a deterioration in credit allocation and heightened competition among banks. Heterogeneous analysis indicates that the impact is more significant in non-election years, in years of enhanced anti-corruption efforts, in regions with poor credit environments, and among smaller banks or banks without political connections. Additionally, compared to normal and local turnover, the positive impact of local official turnover on banks' risk-taking is more pronounced for abnormal and non-local turnovers. These insights deepen our understanding of the economic consequences of official turnover on commercial banks and offer valuable perspectives for banks' risk management strategies.

Playing politics with traffic fines: Sheriff elections and political cycles in traffic fines revenue

AbstractThe political budget cycle theory has extensively documented how politicians manipulate policies during election years to gain an electoral advantage. This paper focuses on county sheriffs, crucial but often neglected local officials, and investigates their opportunistic political behavior during elections. Using a panel data set covering 57 California county governments over four election cycles, we find compelling evidence of traffic enforcement policy manipulation by county sheriffs during election years. Specifically, a county's per capita traffic fines revenue is 30% lower in the election than in nonelection years. The magnitude of the political cycle intensifies when an incumbent sheriff runs for reelection or an election is competitive. Our findings contribute to the political budget cycle theory and provide timely insights into the ongoing debate surrounding law enforcement reform and local governments’ increasing reliance on fines and fees revenue.

Racial discrimination moderates associations between sociopolitical discussions and internalizing problems among racially minoritized college students.

The present study investigated whether associations between sociopolitical discussions and mental health differed by racial discrimination among racially minoritized college students. We also tested whether associations differed between election years-when sociopolitical discussions may be more frequent-and nonelection years. In November 2020, racially minoritized college students (N = 225; Mage = 19.84, SD = 1.41; 72.89% female; 52.00% Asian, 22.67% Latino, 16.00% multiracial, 9.33% races including Black and Middle Eastern) reported how often they had experienced racial discrimination, their frequency of sociopolitical discussions with friends and family, and their mental health. Results indicated that participants who had more frequent sociopolitical discussions with friends-but not family-only reported more internalizing problems if they had never or rarely experienced racial discrimination in the past year. To determine whether results were unique to discussions during election years, a second sample (N = 262; Mage = 20.18, SD = 2.30; 82.53% female; 48.86% Asian, 18.56% Latino, 15.42% multiracial, 17.78% races including Black and Middle Eastern) was recruited 1 year later, and racial discrimination did not moderate associations between sociopolitical discussions and internalizing problems. Sociopolitical discussions with friends during presidential elections may be related to greater internalizing problems for racially minoritized college students who experience racial discrimination less frequently, potentially because they may feel less prepared or less motivated to have these conversations compared to racially minoritized college students who experience racial discrimination more frequently. Future studies should investigate means of promoting sociopolitical discussions on campus while attenuating the association between sociopolitical discussions and internalizing problems. (PsycInfo Database Record (c) 2023 APA, all rights reserved).

Cross-country analysis of the effects of political uncertainty on stock price informativeness

We examine the effects of political uncertainty on the informativeness of stock prices. Using panel data from 49 countries and 441,882 firm-year observations from 2000 to 2020, our results evince several interesting aspects. First, we find that, whereas political uncertainty reduces stock price informativeness in the year prior to elections and during the elections, stock prices tend to be more informative in non-election years. Second, we find that the sensitivity of stock price informativeness to political uncertainty is reduced by the strength of institutional quality. Third, the effects of political uncertainty appear to be heterogeneous across less/unregulated and regulated industries. Lastly, our channel analysis indicates that during the year of elections, firms tend to disclosure less information thereby exerting a negative impact on stock price informativeness. Our results are robust to the system generalized method of moments (SGMM), difference-in-difference, and alternative specifications.

Appeals to the people: A content analysis of references to the people in traditional media, social media, and parliamentary materials

Political representation lies at the heart of representative democracy. In order to signal their connection to the people they are representing, politicians often refer to “the people.” In this study, we focus on how politicians refer to the people and how this varies across three main platforms of communication differing in access and formality: news media, social media, and the parliament. Through an in-depth content analysis of news articles, politicians’ social media posts and parliamentary speeches (N = 1668), we examine how Dutch politicians address the people in terms of “advocacy” for the people and in “opposition” to other actors; which politicians most commonly refer to the people; which communication platforms are predominantly used for this, and whether these references to the people vary across time. We find that references to the people did not differ between election and non-election years. Yet, parties and communication platform both play important roles: references to the people manifest themselves more frequently in social media and in communication from politicians from parties on the left as well as those scoring higher on the populism scale. We also find that there is little variation in advocative references to the people, while communication that includes oppositional references is more prominent among populist actors and those positioned on the political left.

Election cycles and corruption perception in Africa

AbstractThis paper empirically examines whether Africa’s low corruption agenda can be achieved amid election cycles. We employ country-level data from 36 African countries covering the period 1998–2020. Using fixed effects, random effects and dynamic panel data regressions, our results suggest that in election years, increment in government expenditure is associated with higher corruption perception while increment in real GDP growth lowers corruption perception than in non-election years. On regional differences, the effect of election cycles on corruption perception was found to be greater in southern part of Africa than the rest of the sub-regions. These findings may have important implications for policy.

Political uncertainty and analysts’ forecasts: International evidence

This study examines the influence of political uncertainty proxied by national election on analysts’ forecasts across 28 countries. We find analysts’ forecasts’ accuracy decreases, and the optimism increases in national election years compared to these in non-election years. Further analysis supports information opacity, local political connections, politically sensitives industries and the quality of institutions channels through which political uncertainty affects the analysts’ forecasts.

Democratization, Elections, and Public Goods: The Evidence from Deforestation

AbstractThis article shows that over the last three decades, competitive elections were associated with increased deforestation. Protection of forested areas provides long‐term public goods, while their destruction provides short‐term private goods for particular voters. Politicians facing a competitive election offer voters access to forested areas mainly for small‐scale farming or commercial use of timber in exchange for electoral support. I test this theory of political deforestation using satellite generated global forest cover data and the results of over 1,000 national‐level elections between 1982 and 2016. I find that countries that undergo a democratic transition lose an additional 0.8 percentage points of their forest cover each year, that years with close elections have over 1 percentage point per year higher forest cover loss compared to nonelection years, and that as the margin of victory in an election decreases by 10 points, the amount of deforestation increases by 0.7 percentage points per year. These increases are on the order of 5–10 times the average rate of forest loss globally. This suggests democratization is associated with underprovision of environmental public goods and contested elections are partially responsible for this underprovision.

Politicians Avoid Tax Increases Around Elections

<ns2:p>We use new annual data on gasoline taxes and corporate income taxes from U.S. states to analyze whether politicians avoid tax increases in election years. These data contain 3 useful attributes: (1) when state politicians enact tax laws, (2) when state politicians implement tax laws on consumers and firms, and (3) the size of tax changes. Using a pre-analysis research plan that includes regressions of tax rate changes and tax enactment years on time-to-gubernatorial election year indicators, we find that elections decrease the probability of politicians enacting increases in taxes and reduce the size of implemented tax changes relative to non-election years. We find some evidence that politicians are most likely to enact tax increases right after an election. These election effects are stronger for gasoline taxes than for corporate income taxes and depend on no other political, demographic, or macroeconomic conditions. Supplemental analysis supports political salience over legislative effort in generating this difference in electoral effects.</ns2:p>

Intergovernmental transfers as tactical instrument: empirical evidence from fourteen major Indian states

In any federation where intergovernmental transfers form a major chunk of revenues for sub-national governments; determinants of allocation shares have always been a salient issue. This paper makes an empirical attempt to investigate whether there are any political motives behind the distribution of central funds among sub-national governments in case of India. We find that in aggregate terms relatively higher per capita transfers are channelled towards states inhabited by large swing voters to gain/maintain control over such states. The significance of the coefficients of interaction terms between swing; alignment and election year dummies reveals that in case of discretionary transfers; during election years; swing states are receiving disproportionately larger shares while during non-election years core states are favoured disproportionately. It gives an empirical insight into the manner whereby central political party targets both core and swing states for political returns in terms of higher votes. Normative considerations were also found relevant as states with higher rural population were found to receive higher per capita transfers. Representation and alignment were found to be insignificant determinants of allocation shares.

Examining the relationship between elections and wildfires

This paper examines the relationship between local elections and wildfire. Using data of wildfires in Greek municipalities between 2000 and 2010, I estimate models comparing wildfire outcomes in local election years against non-election years. I find that wildfire occurrence and burned area are systematically lower in the years around local elections. In municipalities where incumbents run for re-election, the decrease in wildfire occurrence is smaller in the years leading to elections, and larger in the years following local elections. There is some limited evidence that the likelihood of re-election influences wildfire outcomes around the time of local elections. The results suggest a relationship can exist between politics at the local level, wildfire occurrence and burned area. As political and economic considerations can be important in driving wildfire outcomes, assessing wildfire risk cannot take place separately from the prevailing political, economic and institutional environment.

Time allocation across the Senate election cycle

ABSTRACT This paper evaluates a long-standing question about how senators allocate their time to the task of governance across their lengthy, six-year term. I construct a new individual-level dataset that tracks a key component of a senator’s governance responsibilities, participation in committee hearings. With this dataset, I explain variation in a senator’s propensity to attend committee hearings with reference to the Senate election cycle, electoral competitiveness, cohort socialisation, and the permanent campaign. I find that senatorial policy activism surges in early non-election years – the first and third year of the senate term – but does not plummet until the sixth year, when a senator is up for re-election. In the domain of hearing attendance, I also show that the United States Senate’s workhorses are those who hold marginal seats and come from relatively recent legislative cohorts. Thus, my results suggest that electoral competition and political ambition help promote good governance in the United States.

A wait‐and‐see approach to investments: Do elections play a role?

AbstractUnlike previous studies on electoral investment cycle—the tendency for firms to reduce investment expenditure during an election year relative to nonelection years—that have primarily focused on developed countries, this study documents cycles in private investments in relation to the timing of national elections across a broader set of African countries. The estimation results indicate that during election years, private investment decreases by an average of 16% relative to nonelection years. The results also reveal that private investment falls in the year leading up to an election and increases in the immediate year after an election, consistent with the view that electoral uncertainty deters investments. These findings suggest that electoral investment cycles apply strongly to African countries.

The Bright Side of Political Uncertainty: The Case of R&D

We examine the relationship between political uncertainty and R&D investment by exploiting the timing of U.S. gubernatorial elections as a source of plausibly exogenous variation in uncertainty. In contrast to the literature documenting negative effects of political uncertainty on real investment, we find that uncertainty over government policy encourages firm-level R&D. Firms increase R&D investments by an average of 4.6% in election years relative to non-election years. The uncertainty effect is stronger in hotly contested elections, in politically sensitive and hard-to-innovate industries, and in firms subject to higher growth options and greater product market competition. Our findings suggest that, as predicted by models of investment under uncertainty, the real effects of political uncertainty depend on the properties of the investment and the degree of product market competition and therefore the total effect of political uncertainty on the long-run growth of an economy is unclear.

Politicizing the Minimum Wage: Wage Councils, Worker Mobilization, and Local Elections in Indonesia

Indonesia’s weak labor movement transformed local wage councils from institutions of wage restraint into institutions that delivered generous wage increases. This article argues that the arrival of direct elections created an opportunity for unions to leverage elections to alter the balance of power on the wage councils. Activating that leverage required increased contentiousness and coordination among unions. As unions mobilized around wages, conflict with capital intensified and produced disruptive protests that led incumbents to side with workers. Unions also developed innovative tactics to sustain momentum in nonelection years. As unions turned the wage councils in their favor, employers fought back by shifting the scale of the conflict to the national level; the result was the recentralization of wage setting and more modest increases. In a global context of ever weakening organized labor, the Indonesian case shows how weak unions can gain power by mobilizing politically at the local level.

Do Independent Central Banks Exhibit Varied Behaviour in Election and Non-Election Years?: The Case of Fiscal Policy in Africa

ABSTRACTThe study primarily investigates if the behavior and effectiveness of CBI on fiscal policy varies between non-election and election years. It also examines whether the effectiveness of CBI in improving fiscal performance is enhanced by higher institutional quality. Using recent CBI data f on 48 African countries, 90 other developing countries and 40 developed countries over the period 1970–2012, we apply a two-stage system GMM with Windmeijer small sample robust correction estimator and find that due to the strong incentives of political authorities to influence economic outcomes in election years, CBI has stronger effects on fiscal performance in election years compared to non-election years in developed countries only. However, given higher levels of institutional quality, CBI has stronger effects on fiscal performance in election years compared to non-election years in Africa and other developing countries also.

Dividend policy and political uncertainty: Evidence from the US presidential elections

This paper shows that dividend policies adopted by the US firms are sensitive to presidential elections. Using a large dataset covering six presidential elections (1996–2016), we show that firms pay higher percentage of their earnings as dividends during the election years relative to non-election years. We also show that this sensitivity is confined only to the presidential elections. The gubernatorial elections have no impact on dividend policies adopted by firms. Furthermore, our results suggest that higher are the economic uncertainties (uncertainties related to monetary policies, fiscal policies, and national security policies) in the years of election, higher are the dividend payout ratios. Lastly, we show that firms that pay high dividends during the years of presidential elections have higher value than otherwise similar firms that pay low dividends.

Is the “sell in May and go away” adage the result of an election-year effect?

PurposeThe purpose of this paper is to provide a plausible explanation for the “sell in May” anomaly observed in US stock markets. A heretofore unexplained strategy of selling stock in May and not returning to the market until November has been shown to outperform a simple strategy of buying and holding stock all year long.Design/methodology/approachThe authors compare the seasonal performance of three US size-based portfolios for the May–October and November–April periods considering whether or not they were in years with US congressional elections, which occur every two years.FindingsWhile the sell-in-May effect appears to persist in the long run, the authors find that the anomaly is not present in non-election years. There is no significant difference between the May–October and November–April stock returns in non-election years. The observed sell-in-May effect is driven by poor stock returns in the May–October periods leading up to US presidential or congressional elections and subsequent strong performance in the November–April periods immediately following elections.Originality/valueThe paper offers an election-year effect as an explanation of the sell-in-May anomaly that has been observed in the US stock market. Other possible explanations of the effect, such as seasonal affective disorder, the weather, and daylight savings time, have not gained widespread acceptance.

Does Private Ownership Reduce Political Distortions? Evidence from U.S. Electric Utilities

Politics is believed to distort decisions in regulated private firms as well as in government enterprises. In order to compare the magnitude of these distortions, I examine one of the very few large U.S. industries where both for-profit and government enterprises sell goods to the public: electric utilities. I follow the existing literature in measuring political distortions in two ways: differences between government decisions in election years versus in non-election years, and governments' inability to quickly adapt to change. Using comprehensive U.S. data for the years 1964 through 2014, I find that for-profit electricity rates are more likely to be manipulated before elections, but are more responsive to costs, compared to government electricity rates. Thus private ownership need not reduce political distortions, and may actually increase them. I further provide a theoretical framework that explains the findings.

Investor sentiment and US presidential elections

PurposeThe purpose of this paper is to examine the shifts in investor sentiment around the last seven US presidential elections (1988 through 2012).Design/methodology/approachInvestor sentiment is measured by changes in closed-end funds discounts, and the results are corroborated with three robustness tests, including an alternate measure of investor sentiment obtained from the survey conducted by the American Association of Individual Investors.FindingsClosed­end funds discounts are significantly diminished from two weeks before a US presidential election to a week before the election, and persist until the week after the election, suggesting an increase in investors’ optimism during that period, particularly when a Democrat is elected president. More than the particular party prevailing, however, investors appear to be more interested in avoiding the entrenchment of power since the results suggest that they become optimistic when a change in the ruling party takes place, but become pessimistic when there is power continuity in the White House. The increase in investor optimism that is observed around the time of US presidential elections is not replicated during non-election years, which seems to corroborate that the elections are indeed driving the results.Originality/valueThis paper is the first to formally examine the relation between investor sentiment and US presidential elections using closed-end funds discounts as the measure for sentiment.