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The Effect of War Risk on Managerial and Investor Behavior: Evidence from the Brussels Stock Exchange in the Pre-1914 Era

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  • Verdickt, Gertjan

Abstract

With two news-based measures on war, I document that managers mitigated war risk through dividend cuts, arguably to establish a war chest. Moreover, I find that companies postponed their initial public offerings and that foreign companies were more likely to delist after the onset of wars. Investors reacted negatively to the increase in war news coverage. There is evidence of mean-reversion after a threat of war and a negative drift following the start of war. Finally, I highlight the importance of proximity to military conflicts. In general, the evidence indicates that both managers and investors became more risk averse as a consequence of war news.

Suggested Citation

  • Verdickt, Gertjan, 2020. "The Effect of War Risk on Managerial and Investor Behavior: Evidence from the Brussels Stock Exchange in the Pre-1914 Era," The Journal of Economic History, Cambridge University Press, vol. 80(3), pages 629-669, September.
    • Handle: RePEc:cup:jechis:v:80:y:2020:i:3:p:629-669_1
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    Cited by:

    1. Hartwell, Christopher A. & Zadorozhna, Olha, 2024. "The connections that bind: Political connectivity in the face of geopolitical disruption," Journal of International Management, Elsevier, vol. 30(3).
    2. Biermann, Marcus & Leromain, Elsa, 2023. "The indirect effect of the Russian-Ukrainian war through international linkages: early evidence from the stock market," LSE Research Online Documents on Economics 121332, London School of Economics and Political Science, LSE Library.
    3. Verdickt, Gertjan & Deloof, Marc, 2024. "Banking on innovation: Listed and non-listed equity investing, evidence from société générale de Belgique, 1850–1934," Explorations in Economic History, Elsevier, vol. 93(C).
    4. Marc Deloof & Abe Jong & Wilco Legierse, 2023. "Going public: evidence from stock and bond IPOs in Belgium, 1839–1935," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 17(3), pages 433-466, September.
    5. Oosterlinck, Kim & Reyns, Ariane & Szafarz, Ariane, 2023. "Gold, bitcoin, and portfolio diversification: Lessons from the Ukrainian war," Resources Policy, Elsevier, vol. 83(C).
    6. Del Angel, Marco & Fohlin, Caroline & Weidenmier, Marc D., 2023. "Stock returns and the Spanish flu, 1918–1920," Explorations in Economic History, Elsevier, vol. 90(C).
    7. Annaert, Jan & Verdickt, Gertjan, 2021. "Go active or stay passive: Investment trust, financial innovation and diversification in Belgium's early days," Explorations in Economic History, Elsevier, vol. 79(C).
    8. Leentje Moortgat & Jan Annaert & Marc Deloof, 2024. "The long-run persistence in dividend policy," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 18(3), pages 621-651, September.
    9. Federle, Jonathan & Meier, André & Müller, Gernot & Schularick, Moritz, 2024. "The Price of War," CEPR Discussion Papers 18834, C.E.P.R. Discussion Papers.
      • Federle, Jonathan & Meier, André & Müller, Gernot J. & Mutschler, Willi & Schularick, Moritz, 2024. "The price of war," Kiel Working Papers 2262, Kiel Institute for the World Economy (IfW Kiel).
      • Federle, Jonathan & Meier, André & Müller, Gernot J. & Mutschler, Willi & Schularick, Moritz, 2024. "The price of war," Kiel Policy Brief 171, Kiel Institute for the World Economy (IfW Kiel).
    10. Marc Deloof & Ine Paeleman, 2024. "International entrepreneurship without investor protection: Evidence from initial public offerings in Belgium before the First World War," Economic History Review, Economic History Society, vol. 77(2), pages 523-553, May.

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