The Effect Of Socially Activist Investment Policies On The Financial Markets: Evidence From The South African Boycott
Siew Hong Teoh
University of California - Paul Merage School of Business
University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)
C. Paul Wazzan
Berkeley Research Group,LLC
London Business School Institute of Finance and Accounting working paper 222
Governments and vocal institutional shareholders have been exerting pressure on companies they deem to have objectionable operations (such as tobacco or chemical producers). This paper studies the effect of the most important legislative and shareholder boycott to date, the boycott of the South Africa's apartheid regime. We find that the announcement of legislative/shareholder pressure of voluntary divestment from South Africa had little discernible effect either on the valuation of banks and corporations with South African operations or on the South African financial markets. There is weak evidence that institutional shareholdings increased when corporations divested. In sum, despite the public significance of the boycott and the multitude of divesting companies, financial markets seem to have perceived the boycott to be merely a "sideshow."
Number of Pages in PDF File: 58
JEL Classification: G31, G32, G34
Date posted: November 11, 1996
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