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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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    File URL: http://hdl.handle.net/10.1093/qje/qjr030
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    References listed on IDEAS

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    1. Erik Snowberg & Justin Wolfers & Eric Zitzewitz, 2007. "Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 807-829.
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    5. 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.
    6. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
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    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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