Murder is bad for business - Oxford economics study

Oxford study shows deaths of environmental activists affect companies' share prices.

More environmental activists have been killed since 2002 than UK soldiers in war zones. But, the truth is, murder is very bad for business, according to new research from an international team including Oxford economics professor Nathaniel Lane, which shows financiers steer clear of firms linked to deaths.

More environmental activists have been killed since 2002 than UK soldiers in war zones. But, the truth is, murder is very bad for business, according to new research from Oxford, which shows financiers steer clear of firms linked to deaths

Having studied the impact of more than 350 assassinations over a 20-year period, linked to mining and minerals sector, the researchers have found the murder of activists has had a significantly detrimental effect on the share price and business of multi-nationals which have been ‘named and shamed’, causing multi-million-pound losses.  

In the pre-print study, The Value of Names – Civil Society, Information and Governing Multinationals on the Global Periphery, the team argues, ‘The natural resource industry is a stark example of the tension between society and multinational power. Home to some of the largest global firms, the sector is a flashpoint across the developing world.’

According to Professor Lane, 'Indeed, the point is that we see that human rights reporting and reporting around these events is impactful. In a realm where there is little formal accountability, the work of journalists and civil society can truly impact a firm’s bottom line.'

In a realm where there is little formal accountability, the work of journalists and civil society can truly impact a firm’s bottom line

Around the world, there has been ‘a rising trend in violence towards environmental activists....Specifically, the killing of activists connected to natural resource activity’. The report focuses on such assassinations in the global mining sector, since it is ‘one of the most deadly for activists’. But it also a sector which involves substantial investment, with many firms traded on international stock markets.

According to the report, ‘First, we consider killings that are publicly reported in media or human rights campaigns. Second, we consider events where reporting connects a victim (or victims) to local mining and mineral extraction activity. Third, we then code the location where the death occurred. Fourth, we code the mining companies or projects named (if any) in relation to the event.’

The team says, ‘Our study estimates how publicity surrounding activist assassinations impacts the stock prices of multinationals. Specifically, the mining companies—and their operations—named in international media coverage of these events....

‘Doing so allows us to explore how markets respond to news of violent events surrounding their operations.’

The researchers look at the share prices of companies ‘named’ in human rights’ reporting and international news coverage, without any judgement on the accusations. The examine how firms performed relative to their normal market performance, and also looked at how such corporations fare compared with companies which have not been connected in adverse publicity.

The report reveals, ‘On days leading up to assassinations, we find no evidence of abnormal returns for these companies. Importantly, after the event, we see significant, negative abnormal returns for “named” firms. Significant negative effects appear the day after a killing, and grow steadily for up to ten days after.’

On days leading up to assassinations, we find no evidence of abnormal returns for these companies. Importantly, after the event, we see significant, negative abnormal returns for “named” firms. Significant negative effects appear the day after a killing, and grow steadily for up to ten days after

The involvement of the media and their role in publicising events is key to the public scrutiny of firms and negative publicity once acquired can have a long lasting impact, ‘Companies named in news of assassinations have significant, negative abnormal returns directly following the assassination date–effects which accumulate through time.’

In busy news periods, the researchers found, the impact was not as great. But investors clearly take a close interest in events, ‘Our work suggests that the tools of civil society may help diminish returns to corporate misbehaviour in the developing world.’

The report shows that companies connected to events through publicity were estimated to see their market capitalisation fall by as much as $100 million

The report shows that companies connected to events through publicity were estimated to see their market capitalisation fall by as much as $100 million. The report states, ‘The informational strategies of international civil society impacts the bottom line of multinationals connected to the killing of activists.’

The researchers compared the impact on companies operating in the same vicinity and those which have been explicitly ‘named and shamed’, ‘We find that firms and operations in the vicinity event—though not named in media—are not penalised, relative to those whose operations are specifically named in publicity.’

Research has already been published, showing that ‘markets’ react negatively to bad publicity surrounding businesses. Fraud, insider dealing, environmental, social and governance issues have all been shown to be bad for business.

The researchers believe this is the first time that assassination has been directly linked with negative financial impacts

But the researchers believe this is the first time that assassination has been directly linked with negative financial impacts, ‘To the best of our knowledge, this is the first empirical study that shows that international stock markets react—dare we say penalise—companies operating in association with high profile human rights abuses. In our case, mining companies operating proximate to assassinations of civil society activists...

‘Though preliminary, our findings hint that the publicity strategies of human rights groups, which organise around and place a spotlight on such high-profile episodes, may have some bite. Specifically, by revealing information to international markets. Even where formal justice is rare, these strategies may nevertheless have impact.’

The report concludes, ‘Our findings show that informational campaigns by civil society have in fact an impact on multinational corporations and being linked to human rights abuses can significantly influence an associated companies’ stock market value.’