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Stock market reactions to conflict diamond trading restrictions and controversies

Author

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  • Seitz William Hutchins

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

Abstract

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.

Suggested Citation

  • Seitz William Hutchins, 2016. "Stock market reactions to conflict diamond trading restrictions and controversies," Business and Politics, De Gruyter, vol. 18(1), pages 63-84, April.
  • Handle: RePEc:bpj:buspol:v:18:y:2016:i:1:p:63-84:n:2
    as

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    References listed on IDEAS

    as
    1. Thorvaldur Gylfason & Gylfi Zoega, 2002. "Inequality and Economic Growth: Do Natural Resources Matter?," CESifo Working Paper Series 712, CESifo Group Munich.
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    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).
    9. Kaempfer, William H. & Lehman, James A. & Lowenberg, Anton D., 1987. "Divestment, investment sanctions, and disinvestment: an evaluation of anti-apartheid policy instruments," International Organization, Cambridge University Press, vol. 41(03), pages 457-473, June.
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    More about this item

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade

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