Politics and Financial Markets

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Financial Markets".

Deadline for manuscript submissions: 31 March 2026 | Viewed by 657

Special Issue Editors


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Guest Editor
Department of Economics, American University, Washington, DC 20016, USA
Interests: political risk and financial markets; ESG and financial markets; factors impacting merger premiums and merger outcomes; impact of regulation on financial markets

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Guest Editor
Department of Economic, University of Haifa, Haifa, Israel
Interests: financial economics; regulatory economics; portfolio theory

Special Issue Information

Dear Colleagues,

Scholars have often sought to understand the impact of political risk on financial markets. Certain times, financial markets seem to be isolated from political events, while at other times, financial markets seems to overshoot any such event. With so much written on this topic, this Special Issue seeks new and unique approaches to help us understand how financial markets respond to political risk.

Political risks can cover a range of issues, including institutional concerns, such as democracy, corruption, government stability, and conflict. Political concerns can also include company risks, such as governance, environmental, and organizational risks. Papers may cover equity, debt, and various specific types of assets (e.g., gold, crypto currencies, etc.) We are also interested in papers that explore how changes in political institutions impact financial events, such as mergers and acquisitions, initial public offerings, or other events. Studies can cover markets in specific countries, regions, or types of countries.

Prof. Dr. Ralph Sonenshine
Dr. Doron Nisani
Guest Editors

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Keywords

  • political risk
  • government stability
  • corruption
  • democracy
  • equity returns
  • equity premiums
  • bond spreads
  • ESG
  • mergers

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Published Papers (1 paper)

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Research

34 pages, 426 KB  
Article
Monitoring Mechanisms and Budget Variances: Evidence from the 50 Largest US Cities
by Dongkuk Lim
J. Risk Financial Manag. 2025, 18(9), 500; https://doi.org/10.3390/jrfm18090500 - 10 Sep 2025
Viewed by 371
Abstract
I examine how the association between the current period’s budget variance and the subsequent period’s budget is affected by various governmental monitoring mechanisms. Specifically, I consider the following governance and monitoring mechanisms: governance structure, state/city budget-limiting regulations, and voter-initiated monitoring. I find that [...] Read more.
I examine how the association between the current period’s budget variance and the subsequent period’s budget is affected by various governmental monitoring mechanisms. Specifically, I consider the following governance and monitoring mechanisms: governance structure, state/city budget-limiting regulations, and voter-initiated monitoring. I find that city budgets ratchet in the top 50 populous cities in the US. I also document evidence of asymmetric ratcheting—the current period’s favorable budget variances result in budget increases in the following year that are larger than the decreases associated with unfavorable variances of the same magnitude. Consistent with the political budget cycle hypothesis that budget pattern alters during pre-election periods, I find the asymmetric ratcheting pattern becomes invisible in times of election, particularly when an incumbent runs for re-election. Given this evidence of the opportunistic budgetary pattern, I hypothesize and find that some monitoring mechanisms mitigate the sensitivity of the subsequent period’s budget with respect to the current period’s budget variance. Full article
(This article belongs to the Special Issue Politics and Financial Markets)
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