Business and Society

South Africa boycott was not as (financially) effective as perceived

February 7, 2008 | 1 min read

The event-study portion of the analysis “The Effect of Socially Activist Investment Policies on the Financial Markets: Evidence from the South African Boycott” identifies 10 potentially important political events between March 1985 and October 1986, and estimates their market impact. The authors Siew Hong Teoh, Ivo Welch (both from University of California) and C. Paul Wazzan (LECG Corporation) find “that corporate involvement with South Africa was so small that the announcement of legislative/shareholder pressure or voluntary corporate divestment from South Africa had little discernible effect either on the valuation of banks and corporations with South African operations or on the South African financial markets.

The authors find “weak evidence that divesting firms’ investor clienteles changed, and that divesting firms with more returning institutional shareholders received a perhaps slightly more positive but insignificant valuation response. One explanation may be that the boycott primarily reallocated shares and operations from ‘‘socially responsible’’ to more indifferent investors and countries. Our findings are consistent with the view that demand curves for stocks are highly elastic and so have little downward slope.”

This paper won the 1999 Moskowitz Prize competition (awarded by the Center for Responsible Business at the Haas School of Business, in cooperation with the Social Investment Forum, the Moskowitz Prize promotes the concept, practice, and growth of socially responsible investing).


This article was previously published on, February 7, 2008.

This article may be reproduced according to our terms of use with attribution (and link, if online) to To be cited as: “South Africa boycott was not as (financially) effective as perceived”, Siew Hong Teoh, Ivo Welch, C. Paul Wazzan,, February 7, 2008.

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