Econometric Analysis of Market Responses to Corporate Reports of a Multinational Gold Producer

Abstract

This thesis explores the advances to mandatory corporate disclosures and reporting systems since 1996, including the growing prevalence of optional reporting in Corporate Social Responsibility (CSR) and Technology and Innovation (T&I), specifically by the gold sub-industry which has increased year-over-year. Many multinational mining corporation executive officers preach that this optional reporting generates greater value for shareholders and is critical to corporate success. This research explores whether this claim is supported by market data on regulated trading platforms.

While the social benefits of a strong company-community relationship are immeasurable, the value can be contextualized through econometric techniques which quantify market reactions to various types of corporate disclosures. A custom event study model was built and tested on a case study of a major multinational gold producer. This case study quantified the economic value of mandatory corporate disclosures and evaluated them relative to optional reports. The methodology used benchmarks the company’s equity price to a reconstructed variant of the "NYSE Arca Gold BUGS" (HUI) Index and calculates the abnormal returns for all corporate disclosures. Each abnormal return is then categorized into a performance indicator category (production, financial, corporate, technical), and a T&I or CSR category. Finally, statistical analysis and sentiment analysis determine any economic impacts and trends.

Disclosure system shortcomings are discussed along with recommendations provided on improving electronic disclosure systems, from both a policy and practical perspective. Potential further applications of this custom model include stock price prediction given corporate disclosures as an input, anomalous trading behaviour identification for regulatory tools, and communicating social value on equity valuation to corporate board executives.