Working Paper: CEPR ID: DP10262
Authors: Daron Acemoglu; Tarek A. Hassan; Ahmed Tahoun
Abstract: During Egypt's Arab Spring, unprecedented popular mobilization and protests brought down Hosni Mubarak's government and ushered in an era of competition between three groups: elites associated with Mubarak's National Democratic Party (NDP), the military, and the Islamist Muslim Brotherhood. Street protests continued to play an important role during this power struggle. We show that these protests are associated with differential stock market returns for firms connected to the three groups. Using daily variation in the number of protesters, we document that more intense protests in Tahrir Square are associated with lower stock market valuations for firms connected to the group currently in power relative to non-connected firms, but have no impact on the relative valuations of firms connected to other powerful groups. We further show that activity on social media may have played an important role in mobilizing protesters, but had no direct effect on relative valuations. According to our preferred interpretation, these events provide evidence that, under weak institutions, popular mobilization and protests have a role in restricting the ability of connected firms to capture excess rents.
Keywords: corruption; de facto political power; institutions; mobilization; protests; rents; value of connections
JEL Codes: E02; G12; G3; O11; O43; O53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Larger protests in Tahrir Square (N95) | Lower stock market valuations for NDP-connected firms (G32) |
| Protests (D74) | Decline in value of military-connected firms (H56) |
| Protests (D74) | Systematic effect on rents of firms connected to the incumbent regime (R38) |
| Protests (D74) | Altered market perceptions and expectations about future institutional changes (D84) |
| Protests (D74) | Changes in stock market valuations reflecting shifting perceptions of political connections and rents (G19) |