Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Study shows impact of protests on stock prices

10.10.2007
Corporate leaders at Dow Chemical, Cracker Barrel and Eastman Kodak have learned the hard way that public protests can drive down the value of an otherwise healthy stock.

A new study led by Sarah Soule, professor of sociology at Cornell, and Brayden King, assistant professor of sociology at Brigham Young University, examines how organized public protest affects "abnormal stock price returns" -- an indicator of investor reaction to a focal event. The report, "Social Movements as Extra-institutional Entrepreneurs: The Effect of Protest on Stock Price Returns," is published in the September 2007 issue of Administrative Science Quarterly.

Among the findings: Protests are more influential when they target issues dealing with critical stakeholder groups -- shareholders, for instance -- or when generating greater media coverage. Also, corporate targets are less vulnerable to protest when the media has given substantial coverage to the firm prior to a protest.

The study uses data from 342 protests between 1962 and 1990, as reported in The New York Times. The reliance on a single media source makes sense, Soule said, given that "there is a long history of using The New York Times for data on protest in the U.S., and [it] has been called the 'gold standard'" for such information. Nonetheless, the authors conducted extensive reliability and validity checks using The Wall Street Journal and The Washington Post as alternative sources.

"Because the major financial exchanges in the U.S. are located in New York City, the Times is ideally positioned to cover protests of business corporations," she said. "[However] we do not assume that this is necessarily the source of information used by investors."

The researchers found that protests related to labor or consumer issues provoke a more negative reaction from investors and, perhaps more obviously, that protests with greater levels of media coverage provoke a stronger negative reaction by investors. In fact, media coverage had far more influence on investor behavior than the actual size of the protest itself, the study showed. However, the study showed that prior media coverage of a firm mitigated the influence of a protest because it "provides alternative information to investors that may contradict the messages broadcast by protestors."

Protests by the National Gay and Lesbian Task Force against Cracker Barrel's disastrous 1991 policy to dismiss all gay and lesbian employees, for example, resulted in a national boycott of the chain. The company's stock fell 26 percent below the expected return -- in one month -- even though national sales remained stable. Although Cracker Barrel officials retracted the policy, shareholders forced the company to adopt a nondiscrimination policy regarding same-sex orientation.

In the 1960s, Dow Chemical's stock took a beating when investors organized a protest against its production of napalm; protests against discriminatory hiring policies at Eastman Kodak in the late-1960s hurt the Rochester-based company and forced change.

"Many activists feel that their actions have little or no effect on what corporations do," said Soule. "To the extent that corporations care about their stock price, it seems important to emphasize that social movement activity -- for example, protest -- can affect stock price."

Soule, who recently joined the Cornell faculty, is an expert on social movements theory and methodology. She spent much of the past 10 years examining the impact of social movements on state policy. She is bringing her expertise to the fore as a fellow with the Contentious Knowledge theme project, sponsored by the Cornell Institute for the Social Sciences.

Press Relations Office | EurekAlert!
Further information:
http://www.cornell.edu

More articles from Studies and Analyses:

nachricht The personality factor: How to foster the sharing of research data
06.09.2017 | ZBW – Leibniz-Informationszentrum Wirtschaft

nachricht Europe’s Demographic Future. Where the Regions Are Heading after a Decade of Crises
10.08.2017 | Berlin-Institut für Bevölkerung und Entwicklung

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Ultrafast snapshots of relaxing electrons in solids

Using ultrafast flashes of laser and x-ray radiation, scientists at the Max Planck Institute of Quantum Optics (Garching, Germany) took snapshots of the briefest electron motion inside a solid material to date. The electron motion lasted only 750 billionths of the billionth of a second before it fainted, setting a new record of human capability to capture ultrafast processes inside solids!

When x-rays shine onto solid materials or large molecules, an electron is pushed away from its original place near the nucleus of the atom, leaving a hole...

Im Focus: Quantum Sensors Decipher Magnetic Ordering in a New Semiconducting Material

For the first time, physicists have successfully imaged spiral magnetic ordering in a multiferroic material. These materials are considered highly promising candidates for future data storage media. The researchers were able to prove their findings using unique quantum sensors that were developed at Basel University and that can analyze electromagnetic fields on the nanometer scale. The results – obtained by scientists from the University of Basel’s Department of Physics, the Swiss Nanoscience Institute, the University of Montpellier and several laboratories from University Paris-Saclay – were recently published in the journal Nature.

Multiferroics are materials that simultaneously react to electric and magnetic fields. These two properties are rarely found together, and their combined...

Im Focus: Fast, convenient & standardized: New lab innovation for automated tissue engineering & drug

MBM ScienceBridge GmbH successfully negotiated a license agreement between University Medical Center Göttingen (UMG) and the biotech company Tissue Systems Holding GmbH about commercial use of a multi-well tissue plate for automated and reliable tissue engineering & drug testing.

MBM ScienceBridge GmbH successfully negotiated a license agreement between University Medical Center Göttingen (UMG) and the biotech company Tissue Systems...

Im Focus: Silencing bacteria

HZI researchers pave the way for new agents that render hospital pathogens mute

Pathogenic bacteria are becoming resistant to common antibiotics to an ever increasing degree. One of the most difficult germs is Pseudomonas aeruginosa, a...

Im Focus: Artificial Enzymes for Hydrogen Conversion

Scientists from the MPI for Chemical Energy Conversion report in the first issue of the new journal JOULE.

Cell Press has just released the first issue of Joule, a new journal dedicated to sustainable energy research. In this issue James Birrell, Olaf Rüdiger,...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

“Lasers in Composites Symposium” in Aachen – from Science to Application

19.09.2017 | Event News

I-ESA 2018 – Call for Papers

12.09.2017 | Event News

EMBO at Basel Life, a new conference on current and emerging life science research

06.09.2017 | Event News

 
Latest News

“Lasers in Composites Symposium” in Aachen – from Science to Application

19.09.2017 | Event News

New quantum phenomena in graphene superlattices

19.09.2017 | Physics and Astronomy

A simple additive to improve film quality

19.09.2017 | Power and Electrical Engineering

VideoLinks
B2B-VideoLinks
More VideoLinks >>>