Business
3:52 pm
Wed January 8, 2014

Study: Political Speeches Affect Business Investment in States

A new study from the University of Tennessee finds that talk isn’t cheap when it comes to speeches by politicians.  Specifically, co-author Larry Fauver says the tone and content of governors' state of the state speeches is linked to financial investments in their states.

"Our results showed that there is new information that the governor is revealing to the market," explains Dr. Fauver.  "In addition to that, it's also about the tone of the speech, what the governor will do in the future."

The study analyzed 388 state of the state speeches around the country between 2002 and 2010, and the investment behavior of more than 5,700 companies over the same period.  In the year following a more optimistic speech, businesses invested two percent more of their capital than in states where the governors had a more pessimistic outlook.

Researchers used software to analyze words in the addresses and identified them as either delivering a positive or negative message.  Words such as "successful" and "pride" expressed optimism.  Words like "unemployment" and "hardship" reflected pessimism.

"When there's more uncertainty in the economy, its seems these speeches matter more," states Fauver.  "Perhaps this is one way the companies are getting their information."

The authors also noted that some speeches contain uninformative political rhetoric or information already known to investors.