Stock market reaction to corporate political activity

: when companies confront the government

Abstract

The purpose of this study is to investigate the market reaction to Corporate Political Activity (CPA) using an event study methodology to determine the impact of a specific event on firm’s abnormal stock returns. The sample consists of The Standard & Poor's 500 Index, US-based companies which signed the declaration We are still in, to express their disagreement with the government’s decision to pull the United States of America out of the Paris Agreement, announced on 01.06.2017. Daily stock return data is used in order to calculate the Cumulative Average Abnormal Return (CAAR) and Cumulative Abnormal Return (CAR) for the event window [0,1], including the day of the event and the following day. The main results indicate that there is no market reaction to the studied event. Furthermore, the study presents the results of Hierarchical Multiple Regression models used to investigate the relation between CARs and firm-related factors such as size, reputation, industry regulation and previous engagement in CPA. It was proven that none of these aspects has a significant influence on the studied market reaction.

Date of Award	16 Mar 2018
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Ana Milena Aranda Gutierrez (Supervisor)