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Stock market reactions to conflict diamond trading restrictions and controversies

Listed author(s):
  • Seitz William Hutchins

    ()

    (University of Oxford, Centre for the Study of African Economies, Manor Rd., Oxford OX1 3UQ, UK)

This article explores market reactions to regulations that addressed the link between armed conflict and the diamond industry. The results show that several regulatory actions taken by the United Nations and the United States in the early 2000s corresponded with lower stock returns for diamond mining companies. Such effects are inconsistent with predictions made by some critics of the Kimberley Process Certification Scheme. On the other hand, stock returns for jewelry companies were abnormally negative for events that hurt the reputation of conflict-free production and trade regimes. The expansion of legal diamond markets also coincided with abnormally positive returns for jewelry companies, while new restrictions on market access coincided with abnormally negative returns. The results suggest that i) diamond trade regulations affected businesses in important and measurable ways, and ii) that similar regulations may have broader applicability in related industries.

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File URL: https://www.degruyter.com/view/j/bap.2016.18.issue-1/bap-2014-0048/bap-2014-0048.xml?format=INT
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Article provided by De Gruyter in its journal Business and Politics.

Volume (Year): 18 (2016)
Issue (Month): 1 (April)
Pages: 63-84

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Handle: RePEc:bpj:buspol:v:18:y:2016:i:1:p:63-84:n:2
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  1. Thorvaldur Gylfason & Gylfi Zoega, 2002. "Inequality and Economic Growth: Do Natural Resources Matter?," CESifo Working Paper Series 712, CESifo Group Munich.
  2. Massimo Guidolin & Eliana La Ferrara, 2007. "Diamonds Are Forever, Wars Are Not: Is Conflict Bad for Private Firms?," American Economic Review, American Economic Association, vol. 97(5), pages 1978-1993, December.
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  7. Gary Clyde Hufbauer & Jeffrey J. Schott & Kimberly Ann Elliott, 1990. "Economic Sanctions Reconsidered: 2nd Edition," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 82, January.
  8. Grant, J. Andrew, 2005. "Diamonds, Foreign Aid, and the Uncertain Prospects for Post-Conflict Reconstruction in Sierra Leone," WIDER Working Paper Series 049, World Institute for Development Economic Research (UNU-WIDER).
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