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 A sudden drop in outdoor temperature increases the risk of respiratory infections
11.01.2017 | University of Gothenburg

nachricht Urbanization to convert 300,000 km2 of prime croplands
27.12.2016 | Mercator Research Institute on Global Commons and Climate Change (MCC) gGmbH

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: How gut bacteria can make us ill

HZI researchers decipher infection mechanisms of Yersinia and immune responses of the host

Yersiniae cause severe intestinal infections. Studies using Yersinia pseudotuberculosis as a model organism aim to elucidate the infection mechanisms of these...

Im Focus: Interfacial Superconductivity: Magnetic and superconducting order revealed simultaneously

Researchers from the University of Hamburg in Germany, in collaboration with colleagues from the University of Aarhus in Denmark, have synthesized a new superconducting material by growing a few layers of an antiferromagnetic transition-metal chalcogenide on a bismuth-based topological insulator, both being non-superconducting materials.

While superconductivity and magnetism are generally believed to be mutually exclusive, surprisingly, in this new material, superconducting correlations...

Im Focus: Studying fundamental particles in materials

Laser-driving of semimetals allows creating novel quasiparticle states within condensed matter systems and switching between different states on ultrafast time scales

Studying properties of fundamental particles in condensed matter systems is a promising approach to quantum field theory. Quasiparticles offer the opportunity...

Im Focus: Designing Architecture with Solar Building Envelopes

Among the general public, solar thermal energy is currently associated with dark blue, rectangular collectors on building roofs. Technologies are needed for aesthetically high quality architecture which offer the architect more room for manoeuvre when it comes to low- and plus-energy buildings. With the “ArKol” project, researchers at Fraunhofer ISE together with partners are currently developing two façade collectors for solar thermal energy generation, which permit a high degree of design flexibility: a strip collector for opaque façade sections and a solar thermal blind for transparent sections. The current state of the two developments will be presented at the BAU 2017 trade fair.

As part of the “ArKol – development of architecturally highly integrated façade collectors with heat pipes” project, Fraunhofer ISE together with its partners...

Im Focus: How to inflate a hardened concrete shell with a weight of 80 t

At TU Wien, an alternative for resource intensive formwork for the construction of concrete domes was developed. It is now used in a test dome for the Austrian Federal Railways Infrastructure (ÖBB Infrastruktur).

Concrete shells are efficient structures, but not very resource efficient. The formwork for the construction of concrete domes alone requires a high amount of...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

12V, 48V, high-voltage – trends in E/E automotive architecture

10.01.2017 | Event News

2nd Conference on Non-Textual Information on 10 and 11 May 2017 in Hannover

09.01.2017 | Event News

Nothing will happen without batteries making it happen!

05.01.2017 | Event News

 
Latest News

A big nano boost for solar cells

18.01.2017 | Power and Electrical Engineering

Glass's off-kilter harmonies

18.01.2017 | Materials Sciences

Toward a 'smart' patch that automatically delivers insulin when needed

18.01.2017 | Life Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>