From Lula to Bolsonaro: The immediate impacts of elections on abnormal returns in B3-listed companies

Abstract

Events not directly related to the operation of companies, such as elections and changes in laws, can influence the value of shares and impact the stock market as a whole. Considering the proximity of the Brazilian presidential election in 2022, and aiming to assess trends in the value of some shares and the Brazilian stock market, in this paper it is presented the analysis of the Accumulated Abnormal Returns on the value of common shares of large Brazilian companies after presidential elections. It is also presented the immediate reaction of the Brazilian Stock Market (B3). Eight companies were selected for the study, they are: Petrobras, Banco do Brasil, Vale, Itaúsa, Eletrobrás, Itaú Unibanco Holding and JBS. The criterion for this selection was based on the Forbes Global 2000 ranking published from 2008 to 2021, as will be detailed in the methodology. An Event Study was conducted to calculate the Accumulated Abnormal Returns (RAA) on the value of shares after the first round (event 1) and second round (event 2) of the presidential elections of 2002, 2006, 2010, 2014 and 2018. It was concluded that there were abnormal returns arising from the results of the presidential elections and some common shares were more impacted than others. In the joint view (first and second rounds of each election), Petrobras common shares were the only ones that presented a negative joint Accumulated Abnormal Return (RAAc) after all presidential elections, in addition to obtaining the highest negative RAAc. About the market reaction, captured through the analysis of the Ibovespa, it was observed that the result was negative in the first victory of Lula (2002), however, in his reelection (2006), it was obtained the highest positive result. Regarding the Bolsonaro election (2018), the Ibovespa ROAc was 6.6%, being the most optimistic compared to the first election of Lula (2002) and Dilma (2010).