When Does a Stock Boycott Work? Evidence from a Clinical Study of the Sudan Divestment Campaign

• DOI: 10.1007/s10551-018-4021-0
• Publication Date: 2018-09-29T06:03:50Z
• Authors: Ning Ding; Jerry T. Parwada; Jianfeng Shen; Shan Zhou

The concept of a stock divestment campaign, a common strategy used by social activists to pressure corporations to abandon undesirable practices, contradicts traditional finance theory that regards a stock’s ownership structure to be irrelevant to its risk and return. In this paper we examine the effectiveness of an international stock boycott by studying a large sample of institutional investor transactions in four emerging market stocks targeted by the Sudan divestment campaign from 2001 to 2012. We find evidence of a negative relationship between the intensity of the campaign and the ownership breadth of the stocks. However, selling by institutional investors is only observed in the U.S., where the campaign operates from. Further, higher campaign intensity is associated with depressed stock prices and thus higher future returns. In sum, our results support the effectiveness of the stock boycott.