The Shareholder Value Effect of System Overloads: An Analysis of Investor Responses to the 2003 Blackout in the US

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This study investigates the stock price reaction of electric energy utility firms to the 2003 blackout in the Northeast of the USA and if the market was able to identify the responsible firm. Therefore, we employ event study methodology and select a sample of US-based electric energy utility firms. Although it took a commission almost 8 months to name the firm responsible for the blackout, investors punished FirstEnergy only two trading days after the blackout-and were right, as it later turned out. This study demonstrates this based on the analysis of abnormal stock returns and abnormal trading volumes. Our findings suggest that investors have extensive knowledge of electric energy utility firms’ responsibility as they were able to identify the culprit. This, in turn, demonstrates that electric power utility firms should ensure a high-quality grid infrastructure to avoid these negative outcomes.

Original languageEnglish
JournalInternational Journal of Energy Economics and Policy
Issue number6
Pages (from-to)538-543
Number of pages6
Publication statusPublished - 05.11.2021

Bibliographical note

This publication was funded by the Open Access Publication Fund of Leuphana University Lüneburg.

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    Research areas

  • Blackout, Event Study, Market Efficiency, System Overload