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The Shareholder Value Effect of System Overloads: An Analysis of Investor Responses to the 2003 Blackout in the US

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  • Yassin Denis Bouzzine

    (Leuphana University L neburg, Institute of Management, Accounting and Finance, Universit tsallee, L neburg, Germany,)

  • Rainer Lueg

    (Department of Business and Economics, University of Southern Denmark, Kolding, Denmark.)

Abstract

This study investigates the stock price reaction of electric energy utility firms to the 2003 blackout in the Northeast of the USA and if the market was able to identify the responsible firm. Therefore, we employ event study methodology and select a sample of US-based electric energy utility firms. Although it took a commission almost eight months to name the firm responsible for the blackout, investors punished FirstEnergy only two trading days after the blackout - and were right, as it later turned out. This study demonstrates this based on the analysis of abnormal stock returns and abnormal trading volumes. Our findings suggest that investors have extensive knowledge of electric energy utility firms responsibility as they were able to identify the culprit. This, in turn, demonstrates that electric power utility firms should ensure a high-quality grid infrastructure to avoid these negative outcomes.

Suggested Citation

  • Yassin Denis Bouzzine & Rainer Lueg, 2021. "The Shareholder Value Effect of System Overloads: An Analysis of Investor Responses to the 2003 Blackout in the US," International Journal of Energy Economics and Policy, Econjournals, vol. 11(6), pages 538-543.
    • Handle: RePEc:eco:journ2:2021-06-61
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    References listed on IDEAS

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    Cited by:

    1. Fabio Korinth & Rainer Lueg, 2022. "Corporate Sustainability and Risk Management—The U-Shaped Relationships of Disaggregated ESG Rating Scores and Risk in the German Capital Market," Sustainability, MDPI, vol. 14(9), pages 1-15, May.

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    More about this item

    Keywords

    Event study; Blackout; System overload; Market efficiency;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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