The value of international political connections: evidence from Trump's 2016 surprise election

We investigate the value of international political connections by exploiting the 2016 surprise election of Donald Trump as U.S. president. To identify political connections, we compile a dataset of campaign contributions of U.S. subsidiaries of multinational companies headquartered outside of the U.S. We match these firms with comparable foreign firms that did not make any U.S. campaign contributions. We find that following the 2016 elections the abnormal equity returns for foreign firms that contributed considerably more to Republicans than to Democrats were about 2 percentage points higher than for their non-contributing peers. The results suggest that cross-border political connections can be valuable firm assets.