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Market reactions to regulations on minerals from the democratic republic of the Congo

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  • William Hutchins Seitz

Abstract

Using an event study approach to analyze stock market data from the United States, I investigate how regulations on conflict minerals sourced in the Democratic Republic of the Congo were perceived by investors. I find that for a subset of mining companies, stock returns were abnormally high when regulations in the US became more likely. I also find that returns were higher for communications equipment manufacturing companies when strong regulations in the DRC were announced. I argue that these responses were due to the competitive environments faced by each of these company types. These findings relate to debates surrounding the effects of the conflict mineral regulations. While some critics argue that reporting requirements were tantamount to a ban on minerals from the DRC, I find that stock returns for a subset of companies were sensitive to legislation in the DRC after legislation became law in the US, suggesting that market participants did not expect a complete trade ban on regulated mining and trading activities.

Suggested Citation

  • William Hutchins Seitz, 2015. "Market reactions to regulations on minerals from the democratic republic of the Congo," Defence and Peace Economics, Taylor & Francis Journals, vol. 26(4), pages 425-441, August.
    • Handle: RePEc:taf:defpea:v:26:y:2015:i:4:p:425-441
    DOI: 10.1080/10242694.2014.972088
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    References listed on IDEAS

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    1. Caruso Raul, 2003. "The Impact of International Economic Sanctions on Trade: An Empirical Analysis," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 9(2), pages 1-36, April.
    2. Laura E. Seay, 2012. "What’s Wrong with Dodd-Frank 1502? Conflict Minerals, Civilian Livelihoods, and the Unintended Consequences of Western Advocacy- Working Paper 284," Working Papers 284, Center for Global Development.
    3. Margaret P. Doxey, 1980. "Economic Sanctions and International Enforcement," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-04335-4, December.
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    1. Keisaku HIGASHIDA & Shinsuke MURAKAMI & Takayoshi SHINKUMA, 2022. "Effect of Trade Restrictive Provisions with Due-diligence on Bilateral Trade Flows: The case of the US regulation on conflict minerals," Discussion papers 22054, Research Institute of Economy, Trade and Industry (RIETI).

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