Ulisses Rezende Silva
Doctorate – Influence of the political uncertainty and political connections on corporate investments decisions
Advisor: Prof. Dr. Eduardo Kazuo Kayo
Comission: Profs. Drs. Rosana Tavares, Edison Simoni da Silva and Herbert Kimura
Link YouTube: https://youtu.be/c4CEilm4rkI
In this study, we evaluated the behavior of the investment decisions of Brazilian public companies in periods of presidential elections. The elections are exogenous events, because they occur in fixed dates, that increases political uncertainty due to the unpredictability of the candidates elected and their actions during the government. Based on panel data and with support of instrumental variables to address causality, we analyzed the impact of uncertainty on investment policies during the electoral cycles from 1998 to 2018. We identified a reduction in investment rates due to the increase of the political uncertainty during the elections years, and that competitive elections, those even more unpredictable, generated an even greater reduction in investment rates. The reduction of political uncertainty in the first and second years after the elections, favor the increasing in the investment rates. Finally, we used donations to electoral campaigns to stablish the existence of a political connection between companies and candidates. Thereafter, we investigated whether politically connected companies increased their investments in election years to favor supported candidates, or they increased investments due to less political uncertainty generated by the connection. We found that companies politically connected to the presidential candidate's party also reduce their investments. Thereby, we concluded, that the main support granted to the candidate`s election or reelection is the donation itself. This thesis contributes to research’s related to the evaluation of the impacts of uncertainty, especially political uncertainty, on financial decisions and to the literature related to the influence of political connections on companies' financial decisions, especially on issues related to the exchange of favors. This research innovates by using an instrumental variable, not yet explored, to identify the increase in political uncertainty and, by assessing whether politically connected companies, through political donations, change their investment decisions in electoral periods.
*Abstract provided by the author