Political Monitor

Political donations pay off

Financial Markets

Political donations pay off

April 2015: Political donations pay-off for corporate Australia with listed entities that donated to a political party at the federal level during the 2014 financial year (FY14) significantly outperforming key market indices. And while giving to both parties ensured the best outcome, companies that gave only to the Liberal or National Parties experienced better share price performance than those who only gave to the Australian Labor Party (ALP).

These are the key findings from research into the relationship between political donations and market performance by political risk research and advisory firm Political Monitor.

The Political Monitor research identified over thirty companies in the ASX200 that donated to one or more political party in FY14 with the following results:

  • listed entities that made political donations outperformed the ASX200 by 8.67 percentage points on average, or over 70 percent, while the outperformance against the All Ordinaries was 8.32 percentage points on average, or over 65 percent
  • listed entities that donated to both parties at the federal level experienced better share price performance than entities that gave to only one party with an average gain of 18.5 percent (versus 12.35 percent for the ASX200 and 12.7 percent for the All Ordinaries)
  • listed entities that donated only to the Liberal or National Parties experienced an average share price gain of 17.24 percent, while those donating only to the ALP experienced an increase of 13.69 percent
  • listed entities that gave only to state-based parties experienced the greatest share price gain during FY14 with an average increase of 30.08 percent.

While the research does not demonstrate causation it does reveal that most listed entities that donated to one or more political party in FY14 came from heavily regulated and / or highly scrutinized sectors. Companies engaged in financial services, energy, infrastructure and construction dominated the league table of those making political donations.

However, political donations do not guarantee long-term outperformance with listed entities that donated in FY14 underperforming the market on average in the first half of financial year 2015 (1H15). The average performance for 1H15 of the listed entities in the ASX200 that had donated in FY14 was 3.82 percentage points lower than the ASX200 as a whole and 3.62 percentage points lower than the All Ordinaries index. 

But those that donated to only the ALP outperformed the market on average in 1H15 beating the ASX200 by 2.61 percentage points and the All Ordinaries by 2.81 percentage points. Meanwhile, those that gave only to Conservative parties outperformed both the ASX200 and All Ordinaries on average by 1.65 and 1.85 percentage points respectively.

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