Indonesian Politics in 2014: Democracy’s Close Call

Indonesian democracy experienced a near miss in 2014, when Jakarta governor Joko Widodo (Jokowi) defeated former general Prabowo Subianto by a margin of 6.3% in the presidential election. Both candidates were populists who rose to prominence in the context of public disillusionment with incumbent president Yudhoyono; Prabowo, however, condemned Indonesia's democratic system and promised to take Indonesia in a more authoritarian direction. We trace democracy's close call through five phases: the dying months of Yudhoyono's presidency, the rise of populist alternatives, the parliamentary elections of April 2014, the July presidential campaign, and the aftermath. We attribute the strength of Prabowo's campaign to superior organisational and financial support, while Jokowi's victory rested upon strong identification with him among poor and rural voters. Also determining the outcome was the fact that public satisfaction with democracy remained strong, undermining the effectiveness of Prabowo's authoritarian-populist message. Nevertheless, democracy's future remains uncertain, given that Prabowo and his supporters now control a sufficiently large number of parliamentary seats to continue promoting a rollback of democratic reforms.     

Political uncertainty and a firm's credit risk: Evidence from the international CDS market

Using a large sample of firms with single-name credit default swap (CDS) contracts in 30 countries, we document the evidence that political uncertainty, proxied by national election dummy, is positively related to firm-level credit risk. Specifically, this positive relation is more pronounced for the firms that have no political connection or poor international diversification, and in the countries with higher political uncertainty and lower investor protections. Further, by using a difference-in-differences approach, we find evidence to support idiosyncratic volatility and debt rollover channels through which political uncertainty affects the credit risk of individual firm.     

Are voters rational?

We test whether a voter's decision to cast a vote depends on its probability of affecting the election outcome. Using exogenous variation arising at population cutoffs determining council sizes in Finnish municipal elections, we show that larger council size increases both pivotal probabilities and turnout. These effects are statistically significant, fairly large and robust. Finally, we use a novel instrumental variables design to show that the jumps in the pivotal probabilities are the likely candidate for explaining the increase in turnout, rather than the other observed simultaneous jumps at the council size cutoffs. Moreover, our results indicate that turnout responds only to within-party pivotal probabilities, perhaps because they are more salient to the voters than the between-party ones.     

The consequences of managerial indiscretions: Sex,lies, and firm value

Personal managerial indiscretions are separate from a firm's business activities but provide information about the manager's integrity. Consequently, they could affect counterparties’ trust in the firm and the firm's value and operations. We find that companies of accused executives experience significant wealth deterioration, reduced operating margins, and lost business partners. Indiscretions are also associated with an increased probability of unrelated shareholder-initiated lawsuits, Department of Justice and Securities and Exchange Commission investigations, and managed earnings. Further, chief executive officers and boards face labor market consequences, including forced turnover, pay cuts, and lower shareholder votes at re-election. Indiscretions occur more often at poorly governed firms where disciplinary turnover is less likely.     

Elections and Capital Flows

This paper investigates the extent to which elections affect capital flows. I find little evidence of political capital flow cycles in advanced economies. In emerging and developing countries, however, presidential elections significantly lower preelection foreign direct investment (FDI) inflows but have no effect on other types of capital flows. Furthermore, I find evidence that these cycles are not caused by economic crises related to elections or preelection manipulation of policy variables. These results suggest that uncertainty about future government policies, which should have greater impact on more irreversible forms of capital flows like FDI, may be an important factor in generating this cycle.     

The impact of partner diversity within multiparty international joint ventures

Despite the significant role that multiparty international joint ventures (MPIJVs) play within multinational enterprises, we know little about the significant challenges associated with the management of these ventures. Therefore, we combine the Resource-based View of the Firm and Transaction Cost Economics to investigate the effects of the key aspects of partner diversity (i.e., variety, balance, and disparity) on MPIJV dissolution. We test our hypotheses using a dataset of 248 MPIJVs in China. We find empirical support for a U-curve shaped effect of variety and a negative linear effect of balance on MPIJV dissolution.     

Rewarding the introduction of multiparty elections

Do aid donors reward the adoption of multiparty elections? Are multiparty elections rewarded in both democracies and electoral authoritarian regimes? How do the rewards for institutional reforms compare to the rewards for substantive improvements in governance and political rights? These questions are of particular interest given both the spread of democracy and the emergence of autocracies with multiparty elections for the executive and legislature as the modal form of authoritarianism. To answer these questions, we examine temporal dynamics in aid flows before and after transitions to multiparty elections and the strategic allocation of aid rewards to specific sectors depending upon electoral competition and substantive improvements in governance and political rights. We find that, in the post-Cold War era, bilateral and multilateral donors reward the adoption of multiparty elections in both democracies and electoral authoritarian regimes while also rewarding substantive improvements in governance and political rights. Sector specific analyses reveal that multiparty elections are rewarded with greater democracy aid and economic aid in both democratic and electoral authoritarian regimes. Nevertheless, the quality of elections matters: the adoption of democratic elections receives greater aid gains than the adoption of authoritarian elections.     

Political trust as rational belief: Evidence from Chinese village elections

Democratic governance is believed to improve government responsiveness to citizens’ demand for public goods. In China, villagers’ committee elections represent a major progress in China’s development toward good governance. We develop a rational model to explain villagers’ participation. Utilizing a national survey of rural residents in 2005, this paper tests the insights of the model. Two findings are of interest to the students of voting and elections. First, there is disagreement over the causal relationship between political trust and voting. This paper offers a rational interpretation of political trust by emphasizing the informational aspect of the concept. Second, voting is generally theorized as a process of overcoming various costs. The prospect of benefits figures more prominently in Chinese village elections. Our findings highlight the pivotal role of township governments in China’s rural politics and reveal the inner dilemma of democratization in China.     

Indonesian politics in 2012: coalitions,accountability and the future of democracy

Indonesia is a successful but flawed democracy: while the electoral process has worked well, the quality of democratic governance is less encouraging. Missing from the equation between elections and democracy is political accountability. Parties’ obsession with coalition building as a route to political power has made it difficult for voters to attribute success or failure to elected officials. Coalition government allows politicians to send contradictory messages, and in 2012 religious minorities – which are neither banned nor protected – have paid a heavy price for the lack of accountability and leadership. In Jakarta an outsider, Joko Widodo, won the gubernatorial election despite facing an incumbent backed by a broad coalition. His victory illustrates that coalition building does not guarantee success, and that the electorate is mature enough not to be swayed by appeals to religious and ethnic sentiment. This gives heart to those hoping to strengthen democracy and democratic values in Indonesia.     

Intergenerational spaces: citizens,political marketing and conceptualising trust in a transitional democracy

Abstract

As the third largest democracy in the world, Indonesia’s relatively peaceful transition from authoritarian rule to democracy deserves academic attention. This study explored the notion of trust and how it could influence electoral behaviour. An intergenerational perspective was used to compare the differences between parents who were familiar with the previous political system and their children who have only been exposed to a new democratic system. Through the extension of the Dermody and Hanmer-Lloyd model of electoral behaviour, this study identifies the antecedents of trust/distrust in a transitional democracy and shows how these are different when citizens’ consider the political system and the political candidate. The work can benefit policy makers and political candidates who can develop political marketing strategies to engage citizens in the electoral process.