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Stockholders Vote GOP Regardless of Market Performance

6/4/2012 --

Market decline didn't create a backlash against the Republican Party among American shareholders, says Professor Jerry Davis.

ANN ARBOR, Mich. — Americans who own stock tend to vote Republican even if they're losing money in the stock market under a GOP president, say Ross School researchers.

"The broad stock market declined 40 percent during the time that George Bush was president, yet Bush managed to increase the proportion of shareholders that identified themselves as Republicans from 30 percent to 40 percent between 2000 and 2004," says Jerry Davis, Wilbur K. Pierpont Collegiate Professor of Management and professor of management and organizations at Ross. "And, he kept them in 2008, even as his presidency saw the largest market drop in living memory."

In a forthcoming study in the journal Accounting, Economics, and Law, Davis and colleague Natalie Cotton Nessler, a U-M doctoral student in business and sociology, analyzed data from the American National Election Survey for the 2000, 2004 and 2008 presidential election years.

They found that those who owned stock in 2000 were far more likely to become Republican in 2004 than those who did not. Although the number of shareholders who identified as Republicans dropped between 2004 and 2008, it wasn't much — falling from 40 percent to 39 percent.

"Given the financial implosion and stock market losses, this is surprising, since from a pocketbook perspective, one might have expected a greater backlash against the incumbent Republican Party," says Davis. "However, stockholders as a group remained considerably more likely to favor the Republican Party in 2008, even though their economic interests were worse off."

So, why didn't stock-owning voters penalize the GOP more?

According to the researchers, during Bush's first term, the Republican Party had great success recruiting the investor class by cutting taxes on capital gains and dividends and by pushing for the privatization of Social Security.

"These efforts, and the stock market's relatively robust performance during that time, no doubt gave shareholders a clear economic rationale for swinging Republican," says Cotton Nessler.

But the researchers say party identification may be less about the stock market and pure economic interests than about identity, especially for those who are not clear-cut conservatives or liberals on the political spectrum.

Those shareholders who hold conflicting ideological beliefs with regard to their social and economic positions (some mix of both right-wing and left-wing views), were more susceptible to the GOP's investor class recruitment. But, they also found it more difficult deciding with which political party to identify.

"These voters must more consciously and with greater effort decide among their political options, which makes them both more attentive to the recruitment efforts of the parties, as well as more sensitive to factors, such as stock ownership, which might alter the balance of their 'fit' with either party," says Cotton Nessler.

The researchers also say these kinds of voters are more prone to the social psychology theory of cognitive dissonance — in which a person, when faced with a difficult decision, becomes more committed to his or her beliefs (in this case, party identity), no matter the consequences.

"Given the press received by the investor class theory and the projected pro-investor stance of the Republican Party, the financial meltdown may have been such a jarring event that it triggered cognitive dissonance," says Davis. "As investors sought to make sense of the financial implosion and its consequences, their previous belief in the skill of the Republican Party at managing the economy was challenged.

"To avoid such cognitive dissonance, stockholders' beliefs in the economic skill of the Republicans may have been bolstered, rather than diminished. Like members of a cult whose prophecy has not come true — the classic case of cognitive dissonance — their beliefs were intensified."

In all, the researchers say stockholders, in general, may be sophisticated voters who pursue their "rational" economic interests, but their perceptions of their interests and their political behaviors are subject to psychological and social processes.

For more information, contact:
Bernie DeGroat, (734) 647-1847,