The Impact of Political Contributions and Election Bets on Abnormal Stock Returns and Shareholder Equity in Taiwan's Presidential Elections

Abstract

In recent years, there has been extensive research in the field of political campaign financing. The theoretical discussions on political campaign expenditures and donations, as well as the corresponding empirical results, remain controversial. This study aims to explore the relationship between political contributions and political connections, particularly the intriguing relationship between political contributions and the value of donating companies. Using event study methodology, the study examines the impact of election events on the short-term Cumulative Abnormal Returns (CAR) of company stock prices. Additionally, the study equations research hypotheses and constructs a multiple regression model, adjusting for corporate characteristic parameters and econometric parameters, to investigate the effects of the Political Connections Index (PCI) and Election Betting Results on the long-term corporate value of companies that donate political contributions. Insights can be provided on the impact of corporate political contributions and election betting results on short-term cumulative abnormal returns and the long-term efficiency of corporate shareholder equity.