The Effect Of Socially Activist Investment Policies On The Financial Markets: Evidence From The South African Boycott

London Business School Institute of Finance and Accounting working paper 222

58 Pages Posted: 11 Nov 1996  

Siew Hong Teoh

University of California - Paul Merage School of Business

Ivo Welch

University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)

C. Paul Wazzan

Berkeley Research Group,LLC

Date Written: December 1995

Abstract

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."

JEL Classification: G31, G32, G34

Suggested Citation

Teoh, Siew Hong and Welch, Ivo and Wazzan, C. Paul, The Effect Of Socially Activist Investment Policies On The Financial Markets: Evidence From The South African Boycott (December 1995). London Business School Institute of Finance and Accounting working paper 222. Available at SSRN: https://ssrn.com/abstract=10203 or http://dx.doi.org/10.2139/ssrn.10203

Siew Hong Teoh (Contact Author)

University of California - Paul Merage School of Business ( email )

Irvine, CA California 92697-3125
United States

Ivo Welch

University of California, Los Angeles (UCLA) ( email )

110 Westwood Plaza
C519
Los Angeles, CA 90095-1481
United States
310-825-2508 (Phone)

HOME PAGE: http://www.ivo-welch.info

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Christopher Paul Wazzan

Berkeley Research Group,LLC ( email )

2049 Century Park East, Suite 2525
Los Angeles, CA 90067
United States

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