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Thursday, June 30, 2022

Monetary effect of ‘naming and shaming’ campaigns on multinational companies revealed by a study

A new study has considered accountability frameworks for multinational corporations, Matilda Gettins reports.

CW: Violence.

A study conducted in part by Oxford economics professor Nathaniel Lane has analysed alternative frameworks of accountability for multinational companies, rooted in civil society. These include ‘naming and shaming’ campaigns by human rights organisations as well as media coverage associating an event and a company. The case study used looks at the effect of reporting the assassination of environmental activists in association with mining companies in terms of the change in the stock price of the company.

“[Suits] against multinationals for human rights abuses are exceedingly rare”. Of the 354 assassination events recorded over the last 20 years by the study, the majority took place in the Philippines, Peru, and Colombia. The majority of companies associated are headquartered in Canada, the United Kingdom, and the United States.

To address this lack of accountability, “[civil] society groups’ main strategy is to name the mining companies linked with the event.” They then spread this information using “the global news media to make the general public and the financial markets aware of the human rights abuses.”

The study found that “assassinations events lead to negative abnormal returns for firms associated with violence.” In the 10 days following a reported assasination event, the study calculated a media loss in market capitalization of over 100 USD. The effect was larger on the 5th to 10th days, attributed to the time needed for “market participants … [to] gather additional information” and estimate the monetary “[price]” of a tarnished reputation and legal damages. The recorded effects were also larger on days with “low media pressure”, in which there were fewer other large “newsworthy events”.

The study acknowledges that the reactions are more strategically then morally motivated, writing that, in the past, hedge funds have “not shied away from investing in companies associated with regimes responsible for severe human right violations”. The study hopes to use its results as a foundation for further research on the role of “civil society in governing transnational corporate activities at the global periphery.”

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