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Coups, Corporations, and Classified Information

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  • Arindrajit Dube
  • Ethan Kaplan
  • Suresh Naidu

Abstract

We estimate the impact of coups and top-secret coup authorizations on asset prices of partially nationalized multinational companies that stood to benefit from U.S.-backed coups. Stock returns of highly exposed firms reacted to coup authorizations classified as top-secret. The average cumulative abnormal return to a coup authorization was 9% over 4 days for a fully nationalized company, rising to more than 13% over 16 days. Precoup authorizations accounted for a larger share of stock price increases than the actual coup events themselves. There is no effect in the case of the widely publicized, poorly executed Cuban operations, consistent with abnormal returns to coup authorizations reflecting credible private information. We also introduce two new intuitive and easy to implement nonparametric tests that do not rely on asymptotic justifications. Copyright 2011, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal The Quarterly Journal of Economics.

Volume (Year): 126 (2011)
Issue (Month): 3 ()
Pages: 1375-1409

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Handle: RePEc:oup:qjecon:v:126:y:2011:i:3:p:1375-1409

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  1. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
  2. Knight, Brian, 2006. "Are policy platforms capitalized into equity prices? Evidence from the Bush/Gore 2000 Presidential Election," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 751-773, May.
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Cited by:
  1. Simon Luechinger & Christoph Moser, 2012. "The Value of the Revolving Door: Political Appointees and the Stock Market," CESifo Working Paper Series 3921, CESifo Group Munich.
  2. Moser, Christoph & Rose, Andrew K., 2014. "Who benefits from regional trade agreements? The view from the stock market," European Economic Review, Elsevier, vol. 68(C), pages 31-47.
  3. Roberto Bonfatti, 2011. "An Economic Theory of Foreign Interventions and Regime Change," Economics Series Working Papers 549, University of Oxford, Department of Economics.
  4. Facundo Albornoz & Esther Hauk, 2010. "Civil War and Foreign Influence," UFAE and IAE Working Papers 836.10, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 19 Dec 2010.
  5. Daron Acemoglu & Simon Johnson & Amir Kermani & James Kwak & Todd Mitton, 2013. "The Value of Connections in Turbulent Times: Evidence from the United States," NBER Working Papers 19701, National Bureau of Economic Research, Inc.
  6. Byung-Yeon Kim & Gerard Roland, 2011. "Are the Markets Afraid of Kim Jong-Il?," KIER Working Papers 789, Kyoto University, Institute of Economic Research.

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