Settling the Smoke: Public Policy and Shareholder Wealth in the Cigarette Industry

13 Pages Posted: 27 May 2006

See all articles by Rossitza B. Wooster

Rossitza B. Wooster

Portland State University

Craig A. Gallet

California State University, Sacramento - Department of Economics

Abstract

This article uses daily data on stock returns of five U.S. publicly traded cigarette producers to document the wealth effects of antismoking policies initiated in the period 1964 to 1971. The authors find significant abnormal returns across 23 dates corresponding to important regulatory events. The second-stage estimation shows that wealth effects are also influenced by firm characteristics, such as market share, advertising intensity, percentage of sales of filter-tip cigarettes, percentage of advertising expenditures devoted to TV and radio, and tobacco leaf inventories. Overall, the article estimates that industry losses from antismoking policies amounted to approximately $1.5 billion.

JEL Classification: L66, G14, I18

Suggested Citation

Wooster, Rossitza B. and Gallet, Craig A., Settling the Smoke: Public Policy and Shareholder Wealth in the Cigarette Industry. Contemporary Economic Policy, Vol. 23, No. 2, pp. 211-223, 2005, Available at SSRN: https://ssrn.com/abstract=904739

Rossitza B. Wooster (Contact Author)

Portland State University ( email )

Department of Economics
P.O.Box 751
Portland, OR 97207
United States
503.725.3944 (Phone)
503.725.3945 (Fax)

HOME PAGE: http://web.pdx.edu/~wooster/

Craig A. Gallet

California State University, Sacramento - Department of Economics ( email )

6000 J Street
Sacramento, CA 95819-6082
United States

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