Recent studies highlight the positive effect of political connections on firm performance and stock returns. This paper shows that the positive effect of political connections on stock returns becomes substantially weaker in the weak presidency period, defined as the last 2 years before presidential party change or period of low job approval ratings. We consider two hypotheses—political interconnectedness and political risk—and find that both hypotheses are important in explaining the weak presidency effect on stock returns, political benefits, and research and development and capital expenditure. There is a trade-off between direct political investment and passive political alignment. Firms with direct political investment tend to hedge political risk so that they can run their real side investment on their own schedule. Consistent with this story, we find that the weak presidency effect is more pronounced for small firms that lack the resources for direct political investment.

中文翻译：

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总统权力和股票收益

最近的研究强调了政治联系对公司业绩和股票回报的积极影响。本文表明，政治关系对股票回报的积极影响在总统任期较弱的时期（定义为总统换届前的最后 2 年或工作支持率低的时期）明显减弱。我们考虑了两个假设——政治关联性和政治风险——并发现这两个假设对于解释总统职位对股票回报、政治利益、研发和资本支出的弱影响都很重要。在直接政治投资和被动政治结盟之间存在权衡。拥有直接政治投资的公司倾向于对冲政治风险，以便他们可以按照自己的时间表进行实际投资。