POLITICAL ECONOMY, RELIGIOUS AND ASTROLOGICAL BELIEFS, AND THEIR IMPACT ON FIRM OUTCOMES – EVIDENCE FROM INDIA

Abstract

The first essay of this thesis studies the impact of a major political regime change in India on firm outcomes, and finds that the increase in BJP Members of Parliament in the Treatment group states after the 2014 Central Elections is associated with more bank credit and increased new firm formation in those states in the initial years after the elections, increased revenue and profitability for the largest firms in those states, but not the smaller firms. The second essay studies religious and astrological beliefs’ influence on firm outcomes in India, and finds 7.5 percent more new firms incorporation on Tuesdays in the Hindi Heartland region. This is most consistent with the widespread worship of Lord Hanuman on Tuesdays, and with the astrological belief of Planet Mars’ influence. It further finds that Tuesday incorporated firms exhibit lower profitability, consistent with the inefficacy of these most likely irrational beliefs.