The Value of Majority Status: The Effect of Jeffords's Switch on Asset Prices of Republican and Democratic Firms

Abstract

Using the change in party control of the Senate that resulted from Jim Jeffords's 2001 change in party affiliation, we compare competing partisan and partyless legislative theories. We offer a reconceptualization of agenda control that provides a new and promising basis for studying parties and policymaking in the Senate. Also, we present a novel methodology—an “event study”—to test partisan and partyless hypotheses. Our results show that, when Jeffords switched, the stock prices of Republican‐supported energy firms dropped and prices for Democrat‐supported firms rose, supporting the hypothesis that the majority party influences Senate decisions.