The Impact of Expropriations on the Stock Prices of the Parent Companies: Sell on the rumor, buy on the news?

Diana Constanza Restrepo Ochoa () and Juan Ignacio Peña

No 15007, Documentos de Trabajo de Valor Público from Universidad EAFIT

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: G14 H13 (search for similar items in EconPapers)
Pages: 24
Date: 2016-06-01
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Persistent link: https://EconPapers.repec.org/RePEc:col:000122:015007

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