Campaigning for Capital

Fair Elections and Foreign Investment in Comparative Perspective

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This article makes several contributions to the literature on political risk and the determinants of capital inflows. First, I clarify the relationship between capital flows and democracy’s constituent parts in a way that takes arguments beyond aggregate democracy indicators and static political institutional structures. Specifically, I argue that fair elections signal government respect for democracy and the rule of law in a highly visible manner investors can access. I show how investors therefore use the fairness of elections as a way to assess political risk and to inform their investment strategies. However, the type of investment and the kinds of evidence of electoral misbehavior condition elections’ influence on capital flows. I also disaggregate capital flows into foreign direct investment (FDI) and portfolio investment. I argue that the logic of investing is different in the short term (portfolio) versus the long term (FDI). When it comes to political risk, I provide evidence that portfolio investment is much more sensitive to risk factors than FDI because of the relative ease with which portfolio investors can extricate themselves from an increasingly risky market and seek safer returns elsewhere compared to direct investors.

Original languageEnglish (US)
Pages (from-to)271-294
Number of pages24
JournalInternational Interactions
Volume42
Issue number2
DOIs
StatePublished - Mar 14 2016
Externally publishedYes

Fingerprint

foreign investment
investor
capital movement
election
direct investment
democracy
constitutional state
fairness
evidence
respect
determinants
market

Keywords

  • CPE
  • democracy
  • development
  • foreign direct investment
  • political risk

ASJC Scopus subject areas

  • Political Science and International Relations

Cite this

Campaigning for Capital : Fair Elections and Foreign Investment in Comparative Perspective. / Touchton, Michael.

In: International Interactions, Vol. 42, No. 2, 14.03.2016, p. 271-294.

Research output: Contribution to journalArticle

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