Political Partisanship and Corporate Performance

Abstract

We present evidence that the political orientation of the government (left vs. right) affects corporate performance. We hypothesize that companies within labour-intensive industries polluting industries industries with high profit margins and highly leveraged industries are more sensitive to policies traditionally viewed as 'leftist'; namely those facing stringent labour and environmental laws higher taxes and interest rates. In the empirical analysis we account for the fact that 'leftist' legislation is not necessarily associated with left governments.