Marikana killings: Impact on JSE
- Wits University
The Marikana killings drew international attention with the prevailing discourse focused on human rights.
Masters graduate Nicholas Hill, using a specified event timeframe from 3 January 2012 to 23 August 2012 examined the impact which the Marikana incident had on the companies listed in the mining sector on the Johannesburg Stock Exchange (JSE).
With the world’s view on South Africa at the time, Hill postulated that such an atrocity had the potential to negatively affect the value of firms in the JSE’s mining sector.
Employing an event study methodology, Hill captured the market reaction to the incident. This entailed the determination of abnormal returns on the event date and cumulative abnormal returns for windows defined as two and five days after the event date. The population tested included all companies listed in the mining sector on the JSE.
The results presented a contained impact, limited exclusively to Lonmin Plc. (‘Lonmin’), which exhibited significant abnormal returns on the event date but recovered in the subsequent days. Significant abnormal returns were observed only for the Lonmin share price and no escalation effects were apparent.
Hill says a reasonable explanation is that industrial unrest is not new to the South African mining sector. “What the market is reacting to is not the strike itself but the unusually violent nature of the Marikana incident. In this context, the effect of this incident on share returns is
It suggests that, on the whole, the South African mining sector continues to be regarded as a socially responsible and economically viable investment choice.
Hill’s research offers valuable insight into the potential impact that such events can have on related market indices. He notes that shareholders and management can use these results as a potential indicator of share price reaction to apathy towards corporate social responsibility.
“Companies that do not have good social responsibility practices can use this research as a base for sensitivity analysis should they wish to forecast the potential negative consequences that these events may have on their share prices,” he concludes.