One of the hypotheses that we test is that political parties tend to converge in the centre of the ideological spectrum (Median Voter Theorem), implying that there are no differences in practice in policy terms. The other is that politicians and managers collude, for example through the presence of former politicians in the Board of Directors of firms. Convergence theories prove quite resilient in our study as, jointly, on average quoted firms were not significantly affected by the election outcome. We find that, in spite of rhetoric, investors did not expect significant differences between both major Spanish political parties. The expectation was that the degree of convergence in policies affecting the average profits of firms in the overall market would be high. The overall results are consistent with no partisanship (so no effect on expected macro policies such as fiscal policy, inflation, public expenditure or unemployment policies that may affect the market as a whole). Parties may indeed diverge in non-economic policy dimensions, such as social, religious and cultural norms, foreign policy, or the degree of institutional decentralization. But the profit expectations of the stock market as a whole remained unaffected.
The results on the impact on politically connected companies and particular economic sectors, however, suggest that particular industries and businesses may be affected by the political structure of Spain and the nature of its business-politicians networks. A number of companies were indeed affected by the election results analysed in this article, and the empirical results provide some support to the hypothesis that the degree of political connectedness of such businesses is at the core of explaining the impact of the surprise election results on their financial returns. Of the 87 firms analyzed, 46 were politically connected, in the sense of having some former politician or a person clearly linked to a political party in the Board of Directors. We find only weak evidence that politically connected firms on average were affected by the surprise results. But firms that were connected to the Popular Party were significantly affected by the result. Interestingly, the impact could be positive or negative. It was negative in the case of Endesa but it was positive for example in the case of Telefónica or Iberia. Firms in the energy sector could be affected by partisan effects beyond those related to political connections, because the sector was in the middle of a merger wave about which political parties held different opinions. The fact that firms linked to the PP could have a positive effect from the Socialist Party victory can be interpreted as the collusion between managers and PP politicians being damaging for shareholders.
Our interpretation of these results is that the impact of one party or another governing in Spain is not that there will be big changes in general economic policies, but that the value of collusive agreements between politicians and firms changes.