La actividad misionera de la Iglesia

Panel A of Table III-4 displays cumulative average abnormal returns relative to the three- factor model for four different event windows (−15 to −3, −2 to +2, 0 to +1, +3 to +15). While we observe hardly any abnormal sample stock price reaction around the announcement date and thereafter, we detect a substantially positive abnormal stock price reaction in the event window prior to the announcement day (−15 to −3). Across securities in the sample, the

Stock Market Reaction to Firm Withdrawal from State Sponsor of Terrorism Countries – Punishment for Foregone Business Opportunities or Reward for Ethical Behaviour?

in security prices is not only economically sizeable, but statistically significant as well. The corresponding t-statistic obtained from calculation of the parametric BMP test (2.45) is statis- tically significant at the 5%-level of confidence.

Despite the BW tests methodological drawbacks discussed in the methodology section, we also calculate test-statistics according to the Brown and Warner (1985) methodology. Untabulated results implying the same significance levels as those obtained from calculating the BMP test obviously lead to the same conclusions. When we check this result for robust- ness using the non-parametric Corrado rank test (Panel C), we obtain similar results: the t- statistic obtained from calculation of the Corrado rank test is 2.32 and therefore indicates significance at the 5%-level of confidence, as well. Consequentially, we confirm H1: abnor- mal stock returns of firms announcing withdrawal from one or more countries designated as State Sponsors of Terrorism are positive upon announcement.

Table III-4

Event returns

Panel A: Cumulative abnormal returns

−15 to −3 −2 to +2 0 to 1 +3 to +15

CAR 1.54% −0.26% 0.04% −0.08%

Panel B: BMP test

t-Statistic 2.45 0.10 0.87 −0.05

P>|t| 1.8% 92.4% 38.6% 96.1%

Panel C: Corrado test

t-Statistic 2.32 −0.21 0.89 −0.16

P>|t| 2.4% 83.7% 37.6% 87.2%

This table presents tests results against the null hypothesis of no abnormal return in the respective event window. Panel A displays the CAR (cumulative abnormal return) for 57 firm events relative to the country-specific Fama and French three-factor model. Panel B reports t-statistics and associated p-values obtained from performing the BMP test. Panel C reports t-statistics and associated p-values obtained from performing the Corrado rank test.

Stock Market Reaction to Firm Withdrawal from State Sponsor of Terrorism Countries – Punishment for Foregone Business Opportunities or Reward for Ethical Behaviour?

As mentioned in the data and methodology sections, we also estimate normal performance with a four-factor model including an industry specific global portfolio. In accordance with our expectations stemming from earlier research conducted by Thompson (1988), our results remain qualitatively unchanged once we augment the three-factor model by an industry spe- cific factor. We omit results of this analysis for the sake of brevity.

An aspect that surely warrants some discussion, is the fact that information was incorpo- rated into prices before the actual event took place. That said, information about the with- drawal announcement had leaked into the market before the firm’s decision was made public through the press. Such incidences are not uncommon and are well documented in the litera- ture. Most often when information leakage is detected, abnormal stock price reactions of mergers and acquisitions are analysed (see e.g. Dodd, 1980; Asquith, 1983; Asquith et al., 1983; Schipper and Thompson, 1983 or DeAngelo and DeAngelo, 1989), but it also occurs in other fields of research: see Davidson et al. (1996) for the case of early retirement program announcements, Faff et al. (2002) for the case of international cross-listings and Samitas et al. (2008) for the case of sports sponsorship announcements. In the mentioned studies, infor- mation is incorporated into prices prior to the announcement because the market anticipated the events to occur. When a firm decides to withdraw from a country designated as a State Sponsor of Terrorism, it is most often confronted with public and political pressure before- hand. As a reaction, firms engage in extensive debates within firms and with stakeholder groups. Meznar et al. (1994, p. 1640), also make this point for the case of South Africa with- drawals. They note that “information (…) may often have been available well ahead of the announcement itself”. Furthermore, in the case of oil and gas firms ending upstream activities in one of the designated countries, the withdrawal decision is inextricably linked with the sale of assets (see e.g. the abovementioned case of Marathon Oil. Corp.’s asset sale to Petro- Canada). Such deals do upfront require price negotiations as well as the sporadic intervention

Stock Market Reaction to Firm Withdrawal from State Sponsor of Terrorism Countries – Punishment for Foregone Business Opportunities or Reward for Ethical Behaviour?

of the local government and are therefore even more prone to public awareness. Hence, the apparent information leakage in the case of the decision to withdraw from a State Sponsor of Terrorism country does not come to our surprise.

Cumulative abnormal returns in two of the remaining three event windows are negative alt- hough statistically indistinguishable from zero (−2 to +2, +3 to +15). Especially the negative cumulative abnormal return in the period subsequent to the event (+3 to +15) raises the ques- tion whether the positive abnormal returns prior to announcement are of transitory nature. The untabulated cumulative abnormal return from the event day until 100 days after the event (0 to +100) is positive and suggests a permanent increase in firm value attributable to the withdrawal decision. Beyond the rejection of a potential mean reversion of abnormal returns subsequent to the announcement, this finding also nurtures the supposition of the withdrawal potentially having a long-term impact on firm value. We test for this possibility in Section 7.