APPLIED MICRO: The Value of Names – Civil Society, Information, and Governing Multinationals ; Professor Paul Raschky (Monash University)

Abstract

Does the human rights spotlight impact multinationals? We evaluate the effect of publicizing human rights violations on firm value, focusing on salient events at the center of international campaigns: the assassination of environmental activists. Collecting 20 years of data on activist deaths, we use financial event study methodology to estimate the impact of the human rights spotlight on the stock price of firms associated with violence. We find that the effect of the human rights spotlight is substantial. Firms named in assassination coverage have large, negative abnormal returns after events, and imply a median loss in market capitalization of 100 million USD. We show that the media plays a key role in these effects; the negative impact of assassinations is strongest when they coincide with calm news cycles versus saturated news cycles, where news is less likely to reach investors. Our study highlights economic over non-pecuniary mechanisms. Association with violence negatively impacts supply chain contracts and also inspires negative reactions by institutional investors. Lastly, we show that assassinations are positively related to the royalties paid by mining projects to domestic governments.

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