The Impact of Expropriations on the Stock Prices of the Parent Companies: Sell on the Rumor, Buy on the News?
24 Pages Posted: 23 Aug 2016
Date Written: June 1, 2016
We measure the impact of warnings of expropriation and of forced divestments of private property on the stock prices of the parent company. We use a unique database of 116 events in 12 countries from 2005 to 2013. Our results show significant negative effects on the stock prices of different kinds of warnings; the largest effect is when the warning takes the form of a transitory permit revocation. In the case of forced divestments, we find a significant negative impact when there is a permanent revocation of a permit. However, nationalizations seem to generate a positive market reaction.
Keywords: Expropriation risk, Nationalization, Event study, Stock Market
JEL Classification: G14, H13
Suggested Citation: Suggested Citation