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Disinvestment From South Africa: They Did Well By Doing Good

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  • JUDITH F. POSNIKOFF

Abstract

This paper uses standard event-study methodology to analyze the effect of announcing disinvestment or withdrawal of U.S. firms from South Africa during the 1980s on those firms' returns. Several different measures of abnormal return indicate a consistent and significant positive announcement effect, particularly for the two- and three-day periods surrounding the public announcement. With one exception, these results hold even when the variables are normalized by their respective standard deviations to account for possible changes in variance due to the announcement. Using the "ordinary cross-sectional" test statistic rather than the usual t-statistic explicitly accounts for a change in variance at announcement throughout the analysis. Copyright 1997 Western Economic Association International.

Suggested Citation

  • Judith F. Posnikoff, 1997. "Disinvestment From South Africa: They Did Well By Doing Good," Contemporary Economic Policy, Western Economic Association International, vol. 15(1), pages 76-86, January.
  • Handle: RePEc:bla:coecpo:v:15:y:1997:i:1:p:76-86
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    References listed on IDEAS

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    1. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    2. Bernard Feigenbaum & Anton D. Lowenberg, 1988. "South African Disinvestment: Causes And Effects," Contemporary Economic Policy, Western Economic Association International, vol. 6(4), pages 105-117, October.
    3. William H. Kaempfer & Michael H. Moffett, 1988. "Impact Of Anti-Apartheid Sanctions On South Africa: Some Trade And Financial Evidence," Contemporary Economic Policy, Western Economic Association International, vol. 6(4), pages 118-129, October.
    4. Klein, April, 1986. " The Timing and Substance of Divestiture Announcements: Individual, Simultaneous and Cumulative Effects," Journal of Finance, American Finance Association, vol. 41(3), pages 685-696, July.
    5. Jain, Prem C, 1985. " The Effect of Voluntary Sell-off Announcements on Shareholder Wealth," Journal of Finance, American Finance Association, vol. 40(1), pages 209-224, March.
    6. Ball, Clifford A. & Torous, Walter N., 1988. "Investigating security-price performance in the presence of event-date uncertainty," Journal of Financial Economics, Elsevier, vol. 22(1), pages 123-153, October.
    7. Boehmer, Ekkehart & Masumeci, Jim & Poulsen, Annette B., 1991. "Event-study methodology under conditions of event-induced variance," Journal of Financial Economics, Elsevier, vol. 30(2), pages 253-272, December.
    8. Alexander, Gordon J & Benson, P George & Kampmeyer, Joan M, 1984. " Investigating the Valuation Effects of Announcements of Voluntary Corporate Selloffs," Journal of Finance, American Finance Association, vol. 39(2), pages 503-517, June.
    9. Masulis, Ronald W., 1980. "The effects of capital structure change on security prices : A study of exchange offers," Journal of Financial Economics, Elsevier, vol. 8(2), pages 139-178, June.
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