Discussion Paper Details

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Title: Is Political Risk Company-Specific? The Market Side of the Yukos Affair

Author(s): Alexei P. Goriaev and Konstantin Sonin

Publication Date: May 2005

Keyword(s): company specific political risk, event study, oil, privatization and Russian stock market

Programme Area(s): Financial Economics and Institutions and Economic Performance

Abstract: The Yukos affair, a high-profile story of the state-led assault on a private Russian company, provides an excellent opportunity for an inquiry into the nature of company-specific political risks in emerging markets. News associated primarily with law enforcement agencies? actions against company?s managers, not formally related to the company itself, caused significant negative abnormal returns for Yukos. The results are robust and not driven by a few major events, such as the arrests of Yukos? top managers and shareholders. Stocks of less transparent private Russian companies have been more sensitive to Yukos-related events, especially employee-related charges by the law enforcement agencies. The situation was different for less transparent government-owned companies such as the world-largest natural gas producer Gazprom: they appear to be significantly less sensitive to these events. Actions of regulatory agencies have had predominantly industry-wide impact, whereas law-enforcement agencies? actions affected shares of large private companies, especially those were privatized in the notorious loans-for-shares privatization auctions.

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Bibliographic Reference

Goriaev, A and Sonin, K. 2005. 'Is Political Risk Company-Specific? The Market Side of the Yukos Affair'. London, Centre for Economic Policy Research.