Is Political Risk Company-Specific? The Market Side of the Yukos Affair

32 Pages Posted: 6 Mar 2005

See all articles by Alexei Goriaev

Alexei Goriaev

New Economic School

Konstantin Sonin

University of Chicago - Harris School of Public Policy; Higher School of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2005

Abstract

The Yukos affair, a state-led assault on controlling shareholders of a private Russian oil company, once again demonstrated the shaky nature of property rights in emerging markets. Toughening of the state policy towards business implied higher company-specific political risk and was immediately reflected in lower stock prices. Among private companies, the risk appeared especially high for non-transparent companies, oil companies, and companies privatized via the ill-famous loans-for-shares auctions. Surprisingly, transparent state-owned companies were also very sensitive to Yukos events. This evidence suggests that investors seriously consider risks of tax and privatization review for private companies and inefficient government interference for state-owned ones.

Keywords: company-specific political risk, event study, Russian stock market

JEL Classification: G18

Suggested Citation

Goriaev, Alexei and Sonin, Konstantin, Is Political Risk Company-Specific? The Market Side of the Yukos Affair (November 2005). EFA 2005 Moscow Meetings, Available at SSRN: https://ssrn.com/abstract=676875 or http://dx.doi.org/10.2139/ssrn.676875

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Konstantin Sonin

University of Chicago - Harris School of Public Policy ( email )

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Higher School of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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