Hostname: page-component-77c89778f8-fv566 Total loading time: 0 Render date: 2024-07-21T04:34:24.276Z Has data issue: false hasContentIssue false
  • English
  • Français

Political connections and stock returns: evidence from the Boulangist campaign, 1888–1889

Published online by Cambridge University Press:  25 January 2019

Miguel Ángel Ortiz-Serrano
Miguel Ángel Ortiz-Serrano*
Affiliation:
SciencesPo Paris and Universidad Carlos III de Madrid
*
M. A. Ortiz Serrano, PhD candidate, Department of Social Sciences, Universidad Carlos III de Madrid, C/Madrid 126, 28903 Getafe (Madrid), Spain; and Junior Researcher, Department of Economics, SciencesPo Paris; email: miguelangel.ortizserrano@sciencespo.fr and maortizserrano89@gmail.com.
Get access Rights & Permissions [Opens in a new window]

Abstract

The decade of the 1880s was a turbulent period for the French Third Republic. Corruption scandals that discredited republican parties and a lacklustre economic performance after the Paris Bourse crash of 1882 gave rise to widespread public disenchantment with the republican political elites. The rise of the Boulangist movement was the most representative example of this disillusionment. In 1887, Georges Boulanger, an army general and former minister of war, began orchestrating a populist mass campaign against the ruling republicans and the parliamentary regime. His political agitation, supported by a heterogeneous coalition of socialists, radicals and royalists, reached a climax in January 1889, when, after winning a Paris by-election, he had an opportunity to stage a coup d’état, which did not materialise. To understand whether French investors perceived the Boulangist campaign as a real threat to their interests, I use an original dataset of daily stock prices to analyse the effect of the January 1889 by-election on the value of politically connected firms listed on the Paris Bourse. The results show that firms with links to the republican parties experienced positive cumulative abnormal returns after Boulanger's refusal to stage the coup, while there was no effect on firms connected to the royalist parties or with no political ties. These findings suggest that French investors reacted positively to the prospective subsiding of the Boulangist movement.

Keywords

political connectionsabnormal returnsevent studiesBoulangismFrench Third Republic

JEL classification

G30: General G38: Government Policy and Regulation N23: Europe: Pre-1913
Type
Articles
Information
Financial History Review , Volume 25 , Issue 3 , December 2018 , pp. 323 - 356
Check for updates
Copyright
Copyright © European Association for Banking and Financial History e.V. 2019 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

I would like to thank the editors of the Financial History Review, participants in the FHR Fast-Track Workshop in Turin, and the anonymous referees for their useful suggestions. I am deeply indebted to the Marie Curie Initial Training Network MACROHIST, funded under the European Union's Seventh Framework Programme, which gave me the opportunity to spend two years at Sciences-Po as an Early-Stage Researcher. Thanks to Germán Forero Laverde for all the helpful comments. Many thanks also to Sciences-Po and Guillaume Sarrat des Tramezaigues for their strong support during these years. I am grateful to my supervisor Carlos Santiago-Caballero, as well as to Roberto Galbiati, Quoc-Anh Do, Stéphane Guibaud, Angelo Riva, Robert Hauswald, and participants in the annual conference of the Economic History Society at Keele University (UK), for their advice and comments on earlier drafts. Finally, I owe a huge debt of gratitude to the Centre des Archives Économiques et Financières (CAEF), to the Archives du Crédit Agricole, and, particularly, to Nicolas Gueugneau for the invaluable help provided during my archival work. All remaining errors are mine.

References

Sources

Archives du Crédit Agricole: numerous balances and reports from the Assembly of shareholders for a set of 39 firms. Years: 1887–92.Google Scholar
Bibliothèque Nationale de France: Dictionnaire des parlementaires français: notices biographiques sur les ministres, députés et sénateurs français de 1889 à 1940, vol. iv [and vol. v], [D–G] ed. Jean Jolly.Google Scholar
Centre des Archives Économiques et Financières (CAEF): Annuaires des Agents de Change (1887, 1888, 1889 and 1889).Google Scholar
Gallica: Bulletins de la Cote Officielle de Paris. Compagnie des Agents de Change; Cours authentique de la Bourse de Paris. https://gallica.bnf.fr/ark:/12148/cb32715573v/date.r=compagnie%20des%20agents%20de%20change.Google Scholar
Gallica: Dictionnaire des parlementaires français. Depuis le 1er mai 1789 jusqu'au 1er mai 1889. Robert and Cougny. https://gallica.bnf.fr/ark:/12148/bpt6k83709c?rk=21459;2.Google Scholar

References

Boehmer, E., Masumeci, J. and Poulsen, A. B. (1991). Event-study methodology under conditions of event-induced variance. Journal of Financial Economics, 30(2), 253–72.Google Scholar
Braggion, F. and Moore, L. (2013). The economic benefits of political connections in late Victorian Britain. Journal of Economic History, 73(1), 142–76.Google Scholar
Brav, A. (2000). Inference in long-horizon event studies: a Bayesian approach with application to initial public offerings. Journal of Finance, 55(5), 1979–2016.Google Scholar
Campbell, J. Y., Lo, A. W. C. and Mackinlay, A. C. (1997). The Econometrics of Financial Markets. Princeton, NJ: Princeton University Press.Google Scholar
Coulomb, R. and Sangnier, M. (2014). The impact of political majorities on firm value: do electoral promises or friendship connections matter? Journal of Public Economics, 115, pp. 158–70.Google Scholar
Faccio, M. (2006). Politically connected firms. American Economic Review, 96(1), 369–86.Google Scholar
Faccio, M. (2007). The characteristics of politically connected firms. Purdue University Working Papers, no. 2007–006.Google Scholar
Ferguson, T. and Voth, H. J. (2008). Betting on Hitler: the value of political connections in Nazi Germany. Quarterly Journal of Economics, 123(1), 101–37.Google Scholar
Fisman, R. (2001). Estimating the value of political connections. American Economic Review, 91(4), 1095–1102.Google Scholar
Fulton, B. (1991). The Boulanger affair revisited: the preservation of the Third Republic, 1889. French Historical Studies, 17 (2), pp. 310–29.Google Scholar
Garrigues, J. (1992). Le Boulangisme. Paris: Presses Universitaires de France.Google Scholar
Garrigues, J. (1997). La république des hommes d'affaires: 1870–1900. Paris: Editions Aubier.Google Scholar
Garrigues, J. (1999). Le Général Boulanger. Paris: Perrin.Google Scholar
Goldman, E., Rocholl, J. and So, J. (2009). Do politically connected boards affect firm value? Review of Financial Studies, 22(6), 2331–60.Google Scholar
Grange, C. (2016). Une élite parisienne: les familles de la grande bourgeoisie juive (1870–1939). Paris: CNRS.Google Scholar
Grossman, R. S. and Imai, M. (2016). Taking the lord's name in vain: the impact of connected directors on 19th century British banks. Explorations in Economic History, 59, 75–93.Google Scholar
Hautcoeur, P. C. and Riva, A. (2012). The Paris financial market in the nineteenth century: complementarities and competition in microstructures. Economic History Review, 65(4), 1326–53.Google Scholar
Hutton, P. H. (1976). Popular Boulangism and the advent of mass politics in France, 1886–90. Journal of Contemporary History, 11, pp. 85–106.Google Scholar
Irvine, W. D. (1988). The Boulanger Affair Reconsidered: Royalism, Boulangism, and the Origins of the Radical Right in France. Oxford: Oxford University Press.Google Scholar
Jegadeesh, N. and Karceski, J. (2009). Long-run performance evaluation: correlation and heteroskedasticity-consistent tests. Journal of Empirical Finance, 16(1), 101–11.Google Scholar
Jolly, J. (1960). Dictionnaire des parlementaires français. Notices biographiques sur les ministres, députés et sénateurs français de 1889 à 1940. Paris: Bibliothèque Nationale de France.Google Scholar
Kothari, S. P. and Warner, J. (2007). Econometrics of event studies. In Espen Eckbo, B. (ed.), Handbook of Empirical Corporate Finance, vol. i. Amsterdam: North Holland.Google Scholar
Lagneau-Ymonet, P. and Riva, A. (2018). Trading forward: the Paris Bourse in the nineteenth century. Business History, 60 (2), 257–80.Google Scholar
Le Bris, D. (2012). Les grands travaux du Plan Freycinet: de la subvention à la dépression? Entreprises et Histoire, 69 (4), 8–26.Google Scholar
Le Bris, D. and Hautcoeur, P. C. (2010). A challenge to triumphant optimists? A blue chips index for the Paris stock exchange, 1854–2007. Financial History Review, 17(2), 141–83.Google Scholar
Lehmann-Hasemeyer, S., Hauber, P. and Opitz, A. (2014). The political stock market in the German Kaiserreich: do markets punish the extension of the suffrage to the benefit of the working class? Evidence from Saxony. Journal of Economic History, 74(4), 1140–67.Google Scholar
Lehmann-Hasemeyer, S. and Opitz, A. (2017). The value of political connections in the first German democracy: evidence from the Berlin stock exchange. Hohenheim Discussion Papers in Business, Economics and Social Sciences, no. 24.Google Scholar
Li, H., Meng, L., Wang, Q. and Zhou, L. A. (2008). Political connections, financing and firm performance: evidence from Chinese private firms. Journal of Development Economics, 87(2), 283–99.Google Scholar
Mitchell, M. and Stafford, E. (2000). Managerial decisions and long-term stock price performance. Journal of Business, 73, 287–329.Google Scholar
Okazaki, T. and Sawada, M. (2017). Measuring the extent and implications of corporate political connections in pre-war Japan. Explorations in Economic History, 65, 17–35.Google Scholar
Robert, A. and Cougny, G. (1890). Dictionnaire des parlementaires français, 5 vols. Paris: Bourloton.Google Scholar
Roudelle, O. (1982). La République absolue. Aux origines de l'instabilité constitutionnelle de la France républicaine 1870–1889. Paris: Publications de la Sorbonne.Google Scholar