Working Paper: CEPR ID: DP5076
Authors: Alexei Goriaev; Konstantin Sonin
Abstract: The Yukos affair, a high-profile story of the state-led assault on a private Russian company, provides an excellent opportunity for an inquiry into the nature of company-specific political risks in emerging markets. News associated primarily with law enforcement agencies’ actions against company’s managers, not formally related to the company itself, caused significant negative abnormal returns for Yukos. The results are robust and not driven by a few major events, such as the arrests of Yukos’ top managers and shareholders. Stocks of less transparent private Russian companies have been more sensitive to Yukos-related events, especially employee-related charges by the law enforcement agencies. The situation was different for less transparent government-owned companies such as the world-largest natural gas producer Gazprom: they appear to be significantly less sensitive to these events. Actions of regulatory agencies have had predominantly industry-wide impact, whereas law-enforcement agencies’ actions affected shares of large private companies, especially those were privatized in the notorious loans-for-shares privatization auctions.
Keywords: company specific political risk; event study; oil privatization; Russian stock market
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| actions by law enforcement agencies against Yukos's employees (L49) | significant drops in stock prices (G10) |
| arrests of Yukos's top managers (G34) | sharper declines in stock prices (G10) |
| negative employer-related news (J63) | reduction in returns (G12) |
| negative employer-related news (J63) | increase in systematic risk (beta) (C46) |
| political risk (P26) | financial performance of companies in the Russian market (G19) |
| government ownership and transparency (G38) | sensitivity of stock prices to Yukos-related events (G14) |