Hindenburg report triggered market-wide declines, yet politically connected firms secured positive CARs, revealing political connections’ protective effect.
Authors
Kousik Ganguly, Assistant Professor, Jindal Global Business School, O.P. Jindal Global University, Sonipat, Haryana, India
Ajay Kumar Mishra, Vinod Gupta School of Management, Indian Institute of Technology, Kharagpur, India
Katarzyna Platt, School of Business, SUNY College at Old Westbury, Old Westbury, NY, United States
Summary
This study examines the effects of the Hindenburg Research report on a major Indian conglomerate and its broader impact on the Indian financial market. We analyse how the report’s revelations regarding the Adani Group triggered a cascading ripple effect within the conglomerate and across the market. Our findings indicate that politically connected firms experience positive cumulative abnormal returns (CARs) following the release of the Hindenburg Research report. In contrast, the broader Indian equity market indices display consistently negative abnormal returns, with the impact intensifying in the days following the event. Additionally, results show that firms engaged in share pledging experience negative CARs after the Adani-Hindenburg report, whereas politically connected firms engaged in pledging activities show no reaction to the event. The negative news impact spreads across all market segments and capitalizations. These results suggest that, despite widespread market declines, politically connected firms achieve higher CARs, highlighting a market reassessment and a potential protective effect of political connections amid the scandal.
Published in: Applied Economics Letters
To read the full article, please click here.
