In this paper, we investigate how political shocks affect asset ownership in the global power sector.
Therefore, we gather a unique dataset of 2 million global power plant-year observations including
ownership information over time. In a DiD setting on the power plant level, we leverage the highly
surprising first presidential election of Donald Trump as a quasi-exogenous change of the political
orientation in the U.S. We find that foreign investors are more likely to sell US power plants to home
investors compared to a control group of global power plants. The effect is sizeable: the likelihood
of this asset transaction increases by more than 7 percentage point for a given power plant. We find notable heterogeneity between brown and green US power plants: while foreign investors from liberal countries increase green power plant purchases, they reduce brown purchases. Home investors on the other hand only increase brown purchases. We explain the results by the interplay between the political distance of different investor groups to the new US ideology, as well as the changing climate preference of US investors. We demonstrate robustness of the main findings in a permutation test and in a matched sample. We extend the analysis to multiple right-wing populist elections in a stacked DiD setting and find that foreign-liberal investors sell brown power plants to home investors as a reaction to the elections.
