Proceedings of 3rd Global Accounting, Finance and Economics Conference
5 - 7 May, 2013, Rydges Melbourne, Australia, ISBN: 978-1-922069-23-8
The Impact of Political Events on Stock Prices of Sponsoring
Firms: Evidence from the 2012 Korean Presidential Election
Seonghun Yun and Changi Nam
Based on the argument that election polls are indication of political platform, some
studies examined the effect of broader political events on stock prices (Slemrod
and Greimel, 1999). In 2012, Korea had an important election for the President on
December. Park Geunhye, the ruling party candidate, Moon Jaein, the opposition
party candidate, and Ahn Cheolsoo, the independent candidate, ran for the
presidency and finally Park was elected as the president.
This paper tests for the capitalization of these political events on in the stock prices
of related firms, using 52 sample firms which are categorized into three groups of
political portfolios depending on whether they are favorable for the presidency of
Park, Moon, or Ahn. The list of the firms in the political portfolio of each presidential
candidate is based on the published financial articles written by the top five major
economic newspapers of South Korea.
This paper uses five major political events for the tests: the announcements of
Park’s candidacy, Moon’s candidacy, Ahn’s candidacy, Ahn’s voluntary resignation,
and the result of the presidential election. The daily data with these events are
obtained by DataGuide 5.0 program provided by FnGuide: firm-specific stock
prices from the Korean Stock Market.
For these groups of politically related firms, the daily stock price changes
demonstrate that political events are capitalized on in stock prices. Under a political
event which is favored for Park, the stock prices of Park-favored firms show a
positive tendency. And those of Moon-favored or Ahn-favored firms show a
negative tendency in general, and vice versa.
This paper empirically examines the relationship between political events and stock
price of related firms using Korean case for the first time.
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Seonghun Yun, Korea Advanced Institute of Science and Technology, Daejeon, Korea.
emil:ysh6878@kaist.ac.kr
Changi Nam, Korea Advanced Institute of Science and Technology, Daejeon, Korea.
email:cgnam@kaist.ac.kr