Affiliation:
1. College of Business University of Nevada Reno NV USA
2. Kate Tiedemann School of Business and Finance, Muma College of Business University of South Florida Tampa Florida USA
Abstract
AbstractCorporate political geography influences the value of real options because proximity to political power can trigger greater exposure to uncertainty and/or more growth opportunities. Our empirical tests reveal that although areas closely aligned with the president experience a boost in real options’ value relevance, this effect is significant only among the majority of firms that are neither politically connected nor reliant on government contracts. Our findings are consistent with the notion that political connections essentially eliminate policy uncertainty (render real options value‐irrelevant), whereas government dependence additionally inhibits investment in growth opportunities (ability to exploit volatility) from proximity to political power.
Subject
Economics and Econometrics,Finance