Volume 27, Issue 2 (Summer 2022)
JPBUD 2022, 27(2): 89-125 |
Back to browse issues page
Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
Nazifi Fard K, Motavasseli A. (2022). The Effect of Sectoral Sanctions on Price Returns of Targeted Firms: Evidence from Tehran Stock Exchange. JPBUD. 27(2), 89-125. doi:10.52547/jpbud.27.2.89
URL: http://jpbud.ir/article-1-2120-en.html
URL: http://jpbud.ir/article-1-2120-en.html
1- Institute for Management and Planning Studies, Tehran, Iran.
2- Institute for Management and Planning Studies, Tehran, Iran. , a.motavasseli@imps.ac.ir
2- Institute for Management and Planning Studies, Tehran, Iran. , a.motavasseli@imps.ac.ir
Abstract: (2057 Views)
In this paper, an empirical study has been conducted to document the effects of US sector-specific sanctions on publicly-traded firms listed on the Tehran Stock Exchange. The withdrawal of the US from JCPOA on May 8th, 2018 is considered the main event, and the GARCH (1, 1) model has been utilized along with the OLS estimation of a market model for the estimation of abnormal returns within 11 working days following the event. A multifactor statistical model of expected returns is also considered for controlling the potential effects of the changes in the foreign exchange rate and the risk-free rate of return on the abnormal returns of different firms. The potential effect of size, profitability, and leverage for each firm on the relationship between cumulative abnormal returns and being the target of sector-specific sanctions has been controlled. The results showed that the withdrawal of the US from JCPOA induces a two-day cumulative abnormal return of about -1% for the firms which operate in industries targeted by US sectoral sanctions compared to non-target firms. The effect remains significant for about two weeks. Similarly, the effect of Trump's victory in the presidential election in 2016 on targeted firms is estimated to be significant. Other events in which Trump has speculated about the chance of withdrawal from the JCPOA have no significant effect on the stock market.
Keywords: Event Study, Sectoral Sanction, JCPOA, Abnormal Return, Asset Pricing, Market Model, Multi-Factor Model.
Type of Study: Research |
Subject:
financial economics
Received: Jul 03 2022 | Accepted: Sep 13 2022 | ePublished: Dec 17 2022
Received: Jul 03 2022 | Accepted: Sep 13 2022 | ePublished: Dec 17 2022
References
1. Acemoglu, D., Hassan, T. A., & Tahoun, A. (2018). The Power of the Street: Evidence from Egypt's Arab Spring. The Review of Financial Studies, 31(1), 1-42. [DOI:10.1093/rfs/hhx086]
2. Ahn, D. P., & Ludema, R. D. (2019). Measuring Smartness: The Economic Impact of Targeted Sanctions against Russia. Disrupted Economic Relationships: Disasters, Sanctions, Dissolutions, Cambridge: MIT Press.
3. Ankudinov, A., Ibragimov, R., & Lebedev, O. (2017). Sanctions and the Russian Stock Market. Research in International Business and Finance, 40(1), 150-162. [DOI:10.1016/j.ribaf.2017.01.005]
4. Ball, R., & Brown, P. (1968). An Empirical Evaluation of Accounting Income Numbers. Journal of Accounting Research, 6(2), 159-178. [DOI:10.2307/2490232]
5. Bell, D. E. (1982). Regret in Decision Making under Uncertainty. Operations Research, 30(5), 961-981. [DOI:10.1287/opre.30.5.961]
6. Bollerslev, T. (1986). Generalized Autoregressive Conditional Heteroskedasticity. Journal of Econometrics, 31(3), 307-327. [DOI:10.1016/0304-4076(86)90063-1]
7. Brown, S. J., & Warner, J. B. (1980). Measuring Security Price Performance. Journal of Financial Economics, 8(3), 205-258. [DOI:10.1016/0304-405X(80)90002-1]
8. Brown, S. J., & Warner, J. B. (1985). Using Daily Stock Returns: The Case of Event Studies. Journal of Financial Economics, 14(1), 3-31.
https://doi.org/10.1016/0304-405X(85)90042-X [DOI:10.1016/0304-405X(94)90016-7]
9. Campbell, J. Y., Lo, A., & MacKinlay, C. (1997). The Econometrics of Financial Markets," Princeton University Press, Princeton. New Jersey: MacKinlay. [DOI:10.1515/9781400830213]
10. De Bondt, W. F., & Thaler, R. (1985). Does the Stock Market Overreact? The Journal of Finance, 40(3), 793-805. [DOI:10.1111/j.1540-6261.1985.tb05004.x]
11. Dizaji, S. F. (2014). The Effects of Oil Shocks on Government Expenditures and Government Revenues Nexus (With an Application to Iran's Sanctions). Economic Modelling, 40(1), 299-313. [DOI:10.1016/j.econmod.2014.04.012]
12. Dizaji, S. F., & Ghadamgahi, Z. S. (2021). The Impact of Smart and Non-Smart Sanctions on Government Health Expenditures: Evidence from Developing Resource-Based Countries. MPRA Paper No. 108787
13. Dizaji, S. F., & Van Bergeijk, P. A. (2013). Potential Early Phase Success and Ultimate Failure of Economic Sanctions: A VAR Approach with an Application to Iran. Journal of Peace Research, 50(6), 721-736. [DOI:10.1177/0022343313485487]
14. Draca, M., Garred, J., Stickland, L., & Warrinnier, N. (2022). On Target? Sanctions and the Economic Interests of Elite Policymakers in Iran. The Economic Journal. [DOI:10.1093/ej/ueac042]
15. Dreger, C., Kholodilin, K. A., Ulbricht, D., & Fidrmuc, J. (2016). Between the Hammer and the Anvil: The Impact of Economic Sanctions and Oil Prices on Russia's Ruble. Journal of Comparative Economics, 44(2), 295-308. [DOI:10.1016/j.jce.2015.12.010]
16. Engle, R. F. (1982). Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation. Econometrica: Journal of the Econometric Society, 50(4), 987-1007. [DOI:10.2307/1912773]
17. Fama, E. F., Fisher, L., Jensen, M. C., & Roll, R. (1969). The Adjustment of Stock Prices to New Information. International Economic Review, 10(1), 1-21. [DOI:10.2307/2525569]
18. Farzanegan, M. R., & Hayo, B. (2019). Sanctions and the Shadow Economy: Empirical Evidence from Iranian Provinces. Applied Economics Letters, 26(6), 501-505. [DOI:10.1080/13504851.2018.1486981]
19. Gharehgozli, O. (2017). An Estimation of the Economic Cost of Recent Sanctions on Iran Using the Synthetic Control Method. Economics Letters, 157(1), 141-144. [DOI:10.1016/j.econlet.2017.06.008]
20. Godasiaye, A., & Asali, M. (2018). Measuring the Impact of Sanction on Targeted Firms' Market Value: Evidence from Tehran Exchange Market after European :union: Sanctions. Quarterely Energy Economics Review, 14(56), 87-114. [http://iiesj.ir/article-1-676-fa.html]
21. Haidar, J. I. (2017). Sanctions and Export Deflection: Evidence from Iran. Economic Policy, 32(90), 319-355. [DOI:10.1093/epolic/eix002]
22. Kahneman, D., & Tversky, A. (1979). On the Interpretation of Intuitive Probability: A Reply to Jonathan Cohen. Cognition, 7(4), 409-411. [DOI:10.1016/0010-0277(79)90024-6]
23. Laudati, D., & Pesaran, M. H. (2021). Identifying the Effects of Sanctions on the Iranian Economy Using Newspaper Coverage. arXiv preprint arXiv:2110.09400. [DOI:10.2139/ssrn.3898315]
24. MacKinlay, A. C. (1997). Event Studies in Economics and Finance. Journal of Economic Literature, 35(1), 13-39.
25. Samuelson, P. A. (2016). Proof that Properly Anticipated Prices Fluctuate Randomly. In The world Scientific Handbook of Futures Markets (pp. 25-38): World Scientific. [DOI:10.1142/9789814566926_0002]
26. Shirazi, H., Azarbaiejani, K., & Sameti, M. (2016). The Effect of Economic Sanctions on Iran's Exports. Iranian Economic Review, 20(1), 111-124. [DOI:10.2139/ssrn.2717632]
27. Wang, Y., Wang, K., & Chang, C.-P. (2019). The Impacts of Economic Sanctions on Exchange Rate Volatility. Economic Modelling, 82(1), 58-65. [DOI:10.1016/j.econmod.2019.07.004]
| Rights and permissions | |
.jpg) |
This work is licensed under a Creative Commons Attribution 4.0 International License. |
