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

Author

Listed:
  • Diana Constanza Restrepo Ochoa
  • Juan Ignacio Peña

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.

Suggested Citation

  • Diana Constanza Restrepo Ochoa & Juan Ignacio Peña, 2016. "The Impact of Expropriations on the Stock Prices of the Parent Companies: Sell on the rumor, buy on the news?," Documentos de Trabajo de Valor Público 15007, Universidad EAFIT.
    • Handle: RePEc:col:000122:015007
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    File URL: http://hdl.handle.net/10784/9014
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    More about this item

    Keywords

    Expropriation risk; Nationalization; Event study; Stock Market;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • H13 - Public Economics - - Structure and Scope of Government - - - Economics of Eminent Domain; Expropriation; Nationalization

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