Companies start hoarding massive amounts of cash the second a local mayor narrowly loses an election.
April 2, 2026
Original Paper
Political Turnover and Corporate Cash Holdings: Evidence from Close Mayoral Elections
SSRN · 6411458
The Takeaway
By analyzing 2,397 U.S. elections, researchers found that firms in industries like construction and utilities increase their cash-to-assets ratio by up to 7% when an incumbent loses. This isn't a long-term strategy, but a temporary 'paralysis' caused by the sudden uncertainty of what a new local leader might do.
From the abstract
We estimate the causal effect of municipal political turnover on corporate cash holdings using a regression discontinuity design applied to 2,397 U.S. mayoral elections (1992-2022). Firms in municipal-dependent industries-construction, transportation and utilities, and health and social services-increase their cash-to-assets ratio by 5.5 percentage points (p = 0.0002) in the fiscal year of an incumbent's narrow defeat, strengthening to 7.3 percentage points with covariate adjustment. The effect