The Shareholder Value Effect of System Overloads: An Analysis of Investor Responses to the 2003 Blackout in the US
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In: International Journal of Energy Economics and Policy, Vol. 11, No. 6, 05.11.2021, p. 538-543.
Research output: Journal contributions › Journal articles › Research › peer-review
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TY - JOUR
T1 - The Shareholder Value Effect of System Overloads: An Analysis of Investor Responses to the 2003 Blackout in the US
AU - Bouzzine, Yassin Denis
AU - Lueg, Rainer
N1 - This publication was funded by the Open Access Publication Fund of Leuphana University Lüneburg. Publisher Copyright: © 2021, Econjournals. All rights reserved.
PY - 2021/11/5
Y1 - 2021/11/5
N2 - 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.
AB - 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.
KW - Blackout
KW - Event Study
KW - Market Efficiency
KW - System Overload
UR - http://www.scopus.com/inward/record.url?scp=85118987607&partnerID=8YFLogxK
U2 - 10.32479/ijeep.11756
DO - 10.32479/ijeep.11756
M3 - Journal articles
VL - 11
SP - 538
EP - 543
JO - International Journal of Energy Economics and Policy
JF - International Journal of Energy Economics and Policy
SN - 2146-4553
IS - 6
ER -