James M. Day

Bio: James M. Day is an academic researcher. The author has contributed to research in topics: Government & Balance (accounting). The author has an hindex of 1, co-authored 1 publications receiving 1 citations.

From Washington to Wall Street: The Relationship Between National Politics and Stock Market Performance

Abstract: The question explored in this paper is the relationship between national politics and the stock market. There is an interesting relationship between Washington and Wall Street that has existed in the United States for decades that many citizens either do not know or do not understand. Government has had an increasingly influential role in the economy of the United States, particularly since the creation of the Federal Reserve. We seek to understand and explain the impact the balance of power in Washington and political activity can have on the performance of the stock market.

Politics in banking: does political party control impact bank risk and return?

Abstract: Purpose The purpose of this paper is to investigate the potential impact of political party control on bank profitability and risk. This study extends previous work by looking at overall political power with respect to party control of the House, Senate, and the Presidency. Design/methodology/approach This paper employs regression analysis using several different dependent measures of risk and return. The independent variables include dummies to represent political power and control. Findings The results indicate that political control does impact both bank returns and risk. More specifically, concentration of power in either party results in higher profits. However, risk and returns typically increase during periods of democratic control. Originality/value To date, no research addresses the impact of political control and party affiliation on bank risk and return. Given the importance of banks to the overall economy and financial system, this research should provide policymakers and regulators with a different perspective on bank risk and return.

Covid pandemic, politics and bank performance

Abstract: PurposeThe paper aims to highlight differences in bank performance based on state politics during the onset of the Covid pandemic. The response to Covid pandemic created an unusual opportunity for an investigation of how politics impacts banking due to the initial response to the pandemic being heavily impacted by political affiliation states' governors and dominant parties in state legislatures. Previous research looked at impact of elections on the federal level (both executive and legislative branches) on bank risk and performance. The response to the Covid pandemic in 2020 allows for an investigation on how political influence on the state level impacted banks performance.Design/methodology/approachThe Covid pandemic was an unexpected storm that entered the United States with a vengeance in 2020, taking countless lives and ravaging the economic landscape. The response to the pandemic quickly took a political spin as republican governors showed greater reluctance to shutter business activity in hopes of slowing down the spread of the virus than their democratic counterparts. This paper examines the impact of the two Americas created along the lines of political influence as it impacted bank performance over four-quarters beginning with the fourth quarter of 2019. All US banks are split into groups based on the political affiliation of state governors and the dominant party in state legislatures to measure impact of politics on bank performance and risk.FindingsThis research finds that banks operating in states with republican governors produced greater profits and exhibited higher liquidity levels. The same results held for banks in states where both the governorship and the legislature were controlled by republicans versus banks in states where both the governor and the legislature were democratic. Interestingly, the findings present a reversal when examining banks in states led by republican governors and democratic legislatures versus banks in states with democratic governors and republican legislatures. In those instances of mixed leadership, banks in states with democratic governors tend to show greater profits, greater liquidity while demonstrating lower asset quality.Originality/valueA paper published in Managerial Finance in 2018 discussed the impact of the parties in control of the White house and the legislative branch on bank performance and risk. There have been no studies, to the author’s knowledge, that look at how states' political leadership (gubernatorial and legislative) impact on bank performance. Because the response to the Covid pandemic became a politically polarized issue, the onset of the crisis allowed for measurement of how different responses by republican and democratic state leadership impacted bank performance and risk.