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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.

Suggested Citation

  • Arindrajit Dube & Ethan Kaplan & Suresh Naidu, 2011. "Coups, Corporations, and Classified Information," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1375-1409.
  • Handle: RePEc:oup:qjecon:v:126:y:2011:i:3:p:1375-1409
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    References listed on IDEAS

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    Cited by:

    1. Facundo Albornoz & Esther Hauk, 2010. "Civil War and Foreign Influence," Working Papers 480, Barcelona Graduate School of Economics.
    2. Luechinger, Simon & Moser, Christoph, 2014. "The value of the revolving door: Political appointees and the stock market," Journal of Public Economics, Elsevier, vol. 119(C), pages 93-107.
    3. Acemoglu, Daron & Hassan, Tarek & Tahoun, Ahmed, 2014. "The Power of the Street: Evidence from Egypt's Arab Spring," CEPR Discussion Papers 10262, C.E.P.R. Discussion Papers.
    4. Mare Sarr & Chiara Ravetti & Tim Swanson, 2015. "Why Give Aid to Resource-Rich Autocrats?," CIES Research Paper series 39-2015, Centre for International Environmental Studies, The Graduate Institute.
    5. Wisniewski, Tomasz Piotr, 2016. "Is there a link between politics and stock returns? A literature survey," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 15-23.
    6. Roberto Bonfatti, 2017. "An economic theory of foreign interventions and regime change," Canadian Journal of Economics, Canadian Economics Association, vol. 50(1), pages 306-339, February.
    7. Choy, Siu Kai & Lai, Tat-Kei & Ng, Travis, 2017. "Do tax havens create firm value?," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 198-220.
    8. Bos J.W.B. & Frömmel M. & Lamers M.A.J., 2013. "FDI, terrorism and the availability heuristic for U.S. investors before and after 9/11," Research Memorandum 047, Maastricht University, Graduate School of Business and Economics (GSBE).
    9. Erik O. Kimbrough & Kevin Laughren & Roman M. Sheremeta, 2017. "War and Conflict in Economics: Theories, Applications, and Recent Trends," Working Papers 17-13, Chapman University, Economic Science Institute.
    10. repec:eee:jcecon:v:46:y:2018:i:1:p:157-173 is not listed on IDEAS
    11. 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.
    12. Soumyajit Mazumder, 2016. "Can I stay a BIT longer? The effect of bilateral investment treaties on political survival," The Review of International Organizations, Springer, vol. 11(4), pages 477-521, December.
    13. Aidt, Toke S. & Albornoz, Facundo, 2011. "Political regimes and foreign intervention," Journal of Development Economics, Elsevier, vol. 94(2), pages 192-201, March.
    14. Acemoglu, Daron & Johnson, Simon & Kermani, Amir & Kwak, James & Mitton, Todd, 2016. "The value of connections in turbulent times: Evidence from the United States," Journal of Financial Economics, Elsevier, vol. 121(2), pages 368-391.
    15. Martínez, Luis R., 2017. "Transnational insurgents: Evidence from Colombia's FARC at the border with Chávez's Venezuela," Journal of Development Economics, Elsevier, vol. 126(C), pages 138-153.
    16. Albornoz, Facundo & Hauk, Esther, 2014. "Civil war and U.S. foreign influence," Journal of Development Economics, Elsevier, vol. 110(C), pages 64-78.
    17. Byung-Yeon Kim & Gerard Roland, 2011. "Are the Markets Afraid of Kim Jong-Il?," KIER Working Papers 789, Kyoto University, Institute of Economic Research.
    18. Daniel Berger & William Easterly & Nathan Nunn & Shanker Satyanath, 2013. "Commercial Imperialism? Political Influence and Trade during the Cold War," American Economic Review, American Economic Association, vol. 103(2), pages 863-896, April.
    19. repec:spr:homoec:v:34:y:2017:i:1:d:10.1007_s41412-017-0037-4 is not listed on IDEAS
    20. Catalina Tejada & Eliana Ferrara & Henrik Kleven & Florian Blum & Oriana Bandiera & Michel Azulai, 2015. "State Effectiveness, Growth, and Development," Working Papers id:6668, eSocialSciences.

    More about this item

    JEL classification:

    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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