Stock market reactions to conflict diamond trading restrictions and controversies

This article explores market reactions to regulations that addressed the link between armed conflict and the diamond industry. The results show that several regulatory actions taken by the United Nations and the United States in the early 2000s corresponded with lower stock returns for diamond minin...

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Bibliographic Details
Published in:Business and politics 2016-04, Vol.18 (1), p.63-84
Main Author: Seitz, William Hutchins
Format: Article
Language:English
Subjects:
Certification
Diamond industry
Diamonds
Disputes
Free trade
Jewelry
Mining
Mining industry
Negative events
Production
Regulation
Reputations
Securities markets
Stock exchanges
Trading
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Summary:This article explores market reactions to regulations that addressed the link between armed conflict and the diamond industry. The results show that several regulatory actions taken by the United Nations and the United States in the early 2000s corresponded with lower stock returns for diamond mining companies. Such effects are inconsistent with predictions made by some critics of the Kimberley Process Certification Scheme. On the other hand, stock returns for jewelry companies were abnormally negative for events that hurt the reputation of conflict-free production and trade regimes. The expansion of legal diamond markets also coincided with abnormally positive returns for jewelry companies, while new restrictions on market access coincided with abnormally negative returns. The results suggest that i) diamond trade regulations affected businesses in important and measurable ways, and ii) that similar regulations may have broader applicability in related industries.
ISSN:1369-5258
1469-3569
1469-3569
DOI:10.1515/bap-2014-0048