IDEAS home Printed from https://ideas.repec.org/a/oup/indcch/v33y2024i3p738-761..html
   My bibliography  Save this article

Political discretion and risk: the Fukushima nuclear disaster, the distribution of global operations, and uranium company valuation

Author

Listed:
  • Murod Aliyev
  • Timothy Devinney
  • Andrew Ferguson
  • Peter Lam

Abstract

This paper investigates the relationship between political constraint and investor perception of policy risk using an analysis of the reaction of Australian and Canadian uranium company stocks to the Fukushima nuclear disaster in 2011. Our dataset traces 933 projects of 322 uranium firms located across 36 countries and posits a U-shaped relationship between political constraint and investor perceptions of policy risk. Using an event study methodology as applied to the natural quasi-experiment arising from the event, we link heterogeneous changes in stock returns to the policy risk in the uranium project locations of the firms. The results corroborate the expected relationship and hold even after we control for home-country bias.

Suggested Citation

  • Murod Aliyev & Timothy Devinney & Andrew Ferguson & Peter Lam, 2024. "Political discretion and risk: the Fukushima nuclear disaster, the distribution of global operations, and uranium company valuation," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(3), pages 738-761.
    • Handle: RePEc:oup:indcch:v:33:y:2024:i:3:p:738-761.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/icc/dtad038
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hill, Joanne & Schneeweis, Thomas, 1983. "The Effect of Three Mile Island on Electric Utility Stock Prices: A Note," Journal of Finance, American Finance Association, vol. 38(4), pages 1285-1292, September.
    2. Lopatta, Kerstin & Kaspereit, Thomas, 2014. "The cross-section of returns, benchmark model parameters, and idiosyncratic volatility of nuclear energy firms after Fukushima Daiichi," Energy Economics, Elsevier, vol. 41(C), pages 125-136.
    3. Jiménez, Alfredo & Luis-Rico, Isabel & Benito-Osorio, Diana, 2014. "The influence of political risk on the scope of internationalization of regulated companies: Insights from a Spanish sample," Journal of World Business, Elsevier, vol. 49(3), pages 301-311.
    4. Jonathan P. Doh & Thomas Lawton & Tazeeb Rajwani, 2012. "Advancing Nonmarket Strategy Research : Institutional Perspectives in a Changing World," Post-Print hal-02312974, HAL.
    5. Stephen J Kobrin, 1979. "Political Risk: A Review and Reconsideration," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 10(1), pages 67-80, March.
    6. Quang Nguyen & Trang Kim & Marina Papanastassiou, 2018. "Correction to: Policy uncertainty, derivatives use, and firm-level FDI," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(2), pages 248-248, February.
    7. James W. Kolari & Seppo Pynnönen, 2010. "Event Study Testing with Cross-sectional Correlation of Abnormal Returns," The Review of Financial Studies, Society for Financial Studies, vol. 23(11), pages 3996-4025, November.
    8. Witold J. Henisz, 2002. "The institutional environment for infrastructure investment," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 11(2), pages 355-389.
    9. Bowen, Robert M. & Castanias, Richard P. & Daley, Lane A., 1983. "Intra-Industry Effects of the Accident at Three Mile Island," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(1), pages 87-111, March.
    10. Guy L. F. Holburn & Bennet A. Zelner, 2010. "Political capabilities, policy risk, and international investment strategy: evidence from the global electric power generation industry," Strategic Management Journal, Wiley Blackwell, vol. 31(12), pages 1290-1315, December.
    11. Jo Thori Lind & Halvor Mehlum, 2010. "With or Without U? The Appropriate Test for a U‐Shaped Relationship," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(1), pages 109-118, February.
    12. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    13. Reid W Click & Robert J Weiner, 2010. "Resource nationalism meets the market: Political risk and the value of petroleum reserves," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(5), pages 783-803, June.
    14. Quang Nguyen & Trang Kim & Marina Papanastassiou, 2018. "Policy uncertainty, derivatives use, and firm-level FDI," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(1), pages 96-126, January.
    15. Richard F. J. Haans & Constant Pieters & Zi-Lin He, 2016. "Thinking about U: Theorizing and testing U- and inverted U-shaped relationships in strategy research," Strategic Management Journal, Wiley Blackwell, vol. 37(7), pages 1177-1195, July.
    16. Chang Hoon Oh & Jennifer Oetzel, 2022. "Multinational enterprises and natural disasters: Challenges and opportunities for IB research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(2), pages 231-254, March.
    17. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
    18. Thomas Kaspereit, 2021. "Event studies with daily stock returns in Stata: Which command to use?," Stata Journal, StataCorp LP, vol. 21(2), pages 462-497, June.
    19. Daniel J. Blake & Caterina Moschieri, 2017. "Policy risk, strategic decisions and contagion effects: Firm‐specific considerations," Strategic Management Journal, Wiley Blackwell, vol. 38(3), pages 732-750, March.
    20. Thi Bui & Andrew Ferguson & Peter Lam, 2021. "CEO compensation in early‐stage firms: Rewards for prospectivity and survival," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(5-6), pages 895-928, May.
    21. Witold J. Henisz & Sinziana Dorobantu & Lite J. Nartey, 2014. "Spinning gold: The financial returns to stakeholder engagement," Strategic Management Journal, Wiley Blackwell, vol. 35(12), pages 1727-1748, December.
    22. Kobrin, Stephen J., 1987. "Testing the bargaining hypothesis in the manufacturing sector in developing countries," International Organization, Cambridge University Press, vol. 41(4), pages 609-638, October.
    23. Chang Hoon Oh & Daniel Shapiro & Shuna Shu Ham Ho & Jiyoung Shin, 2020. "Location matters: Valuing firm‐specific nonmarket risk in the global mining industry," Strategic Management Journal, Wiley Blackwell, vol. 41(7), pages 1210-1244, July.
    24. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    25. Ball, R & Brown, P, 1968. "Empirical Evaluation Of Accounting Income Numbers," Journal of Accounting Research, Wiley Blackwell, vol. 6(2), pages 159-178.
    26. Getachew, Yamlaksira S. & Beamish, Paul W., 2021. "Unbundling the effects of host-country institutions on foreign subsidiary survival: A case for subsidiary heterogeneity," Journal of World Business, Elsevier, vol. 56(4).
    27. Thomas L Brewer, 1983. "The Instability of Governments and the Instability of Controls on Funds Transfers by Multinational Enterprises: Implications for Political Risk Analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 14(3), pages 147-157, September.
    28. Fama, Eugene F & French, Kenneth R, 1996. "Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
    29. Jonathan P. Doh & Thomas Lawton & Tazeeb Rajwani, 2012. "Advancing Nonmarket Strategy Research : Institutional Perspectives in a Changing World," Post-Print hal-02276718, HAL.
    30. Pei Sun & Jonathan P. Doh & Tazeeb Rajwani & Donald Siegel, 2021. "Navigating cross-border institutional complexity: A review and assessment of multinational nonmarket strategy research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(9), pages 1818-1853, December.
    31. Zhu, Ying & Sardana, Deepak, 2020. "Multinational enterprises’ risk mitigation strategies in emerging markets: A political coalition perspective," Journal of World Business, Elsevier, vol. 55(2).
    32. Henisz, Witold J, 2000. "The Institutional Environment for Multinational Investment," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 16(2), pages 334-364, October.
    33. Tao Huang & Fei Wu & Jin Yu & Bohui Zhang, 2015. "Political risk and dividend policy: Evidence from international political crises," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 46(5), pages 574-595, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Caterina Moschieri & Davide Ravasi & Quy Huy, 2024. "Why Do Some Multinational Firms Respond Better Than Others to the Hostility of Host Governments? Proximal Embedding and the Side Effects of Local Partnerships," Journal of Management Studies, Wiley Blackwell, vol. 61(2), pages 627-685, March.
    2. Gamso, Jonas & Nelson, Roy C., 2019. "Does partnering with the World Bank shield investors from political risks in less developed countries?," Journal of World Business, Elsevier, vol. 54(5), pages 1-1.
    3. Sabet, Amir H. & Heaney, Richard, 2016. "An event study analysis of oil and gas firm acreage and reserve acquisitions," Energy Economics, Elsevier, vol. 57(C), pages 215-227.
    4. Weiguo Zhong & Ya Lin & Danxue Gao & Haibin Yang, 2019. "Does politician turnover affect foreign subsidiary performance? Evidence in China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(7), pages 1184-1212, September.
    5. Oberndorfer, Ulrich & Schmidt, Peter & Wagner, Marcus & Ziegler, Andreas, 2013. "Does the stock market value the inclusion in a sustainability stock index? An event study analysis for German firms," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 497-509.
    6. Naoki Yasuda & Hitoshi Mitsuhashi, 2017. "Learning from Political Change and the Development of MNCs’ Political Capabilities: Evidence from the Global Mining Industry," Management International Review, Springer, vol. 57(5), pages 749-774, October.
    7. Carney, Richard W. & El Ghoul, Sadok & Guedhami, Omrane & Wang, He (Helen), 2024. "Geopolitical risk and the cost of capital in emerging economies," Emerging Markets Review, Elsevier, vol. 61(C).
    8. Charles E. Stevens & En Xie & Mike W. Peng, 2016. "Toward a legitimacy-based view of political risk: The case of Google and Yahoo in China," Strategic Management Journal, Wiley Blackwell, vol. 37(5), pages 945-963, May.
    9. Alfredo Jiménez & Diana Benito-Osorio & Carmen Palmero-Cámara, 2015. "Learning from Risky Environments: Global Diversification Strategies of Spanish MNEs," Management International Review, Springer, vol. 55(4), pages 485-509, August.
    10. Kothari, S. P., 2001. "Capital markets research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 105-231, September.
    11. Vural-Yavaş, Çiğdem, 2020. "Corporate risk-taking in developed countries: The influence of economic policy uncertainty and macroeconomic conditions," Journal of Multinational Financial Management, Elsevier, vol. 54(C).
    12. Albino-Pimentel, João & Dussauge, Pierre & El Nayal, Omar, 2022. "Intellectual property rights, non-market considerations and foreign R&D investments," Research Policy, Elsevier, vol. 51(2).
    13. Sabet, Amir H. & Agha, Mahmoud & Heaney, Richard, 2018. "Value of investment: Evidence from the oil and gas industry," Energy Economics, Elsevier, vol. 70(C), pages 190-204.
    14. João Albino-Pimentel & Jennifer Oetzel & Chang Hoon Oh & Nicholas A. Poggioli, 2021. "Positive institutional changes through peace: The relative effects of peace agreements and non-market capabilities on FDI," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(7), pages 1256-1278, September.
    15. Fernando Rubio, 2005. "Eficiencia De Mercado, Administracion De Carteras De Fondos Y Behavioural Finance," Finance 0503028, University Library of Munich, Germany, revised 23 Jul 2005.
    16. Fdez-Galiano, Inés Merino & Feria-Dominguez, José Manuel, 2024. "Do ESG disclosures mitigate investors’ reaction on mining disasters? Evidence from Brazil," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 256-267.
    17. Ding, Li & Lam, Hugo K.S. & Cheng, T.C.E. & Zhou, Honggeng, 2018. "A review of short-term event studies in operations and supply chain management," International Journal of Production Economics, Elsevier, vol. 200(C), pages 329-342.
    18. Lopatta, Kerstin & Kaspereit, Thomas, 2014. "The cross-section of returns, benchmark model parameters, and idiosyncratic volatility of nuclear energy firms after Fukushima Daiichi," Energy Economics, Elsevier, vol. 41(C), pages 125-136.
    19. Ferguson, Colin & Finn, Frank & Hall, Jason & Pinnuck, Matt, 2010. "Speculation and e-commerce: The long and the short of IT," International Journal of Accounting Information Systems, Elsevier, vol. 11(2), pages 79-104.
    20. Doh, Jonathan & McGuire, Steven & Ozaki, Toshiya, 2015. "The Journal of World Business Special Issue: Global governance and international nonmarket strategies: Introduction to the special issue," Journal of World Business, Elsevier, vol. 50(2), pages 256-261.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:indcch:v:33:y:2024:i:3:p:738-761.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/icc .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.