Ibadan Journal of the Social Sciences
Volume 5, No. 1, 2007
Pages 17-27

DOI: 10.36108/ijss/7002.50.0120

Political Succession, Capital Market Performance and Firm Valuations in Nigeria
Olatundun Adelegan

Department of Economics, University of Ibadan


This paper studies the impact of political succession Oil capital market performance and firm valuation in Nigeria. The study assesses the market capitalization and foreign portfolio investment trend before and during The Fourth Republic. it also investigates the price reactions of 20 most actively traded stocks to the commencement of the Fourth Republic on May 29, 1999 using daily stock prices for 30 days between May and June 1999. The study used the modified market model to analyze the 3-day immediate short-run, the 14 days before and the 15 days after the market reactions to change in government. The results show that the average excess returns for the samples are negative, from day 14 to day 1before a political succession and positive from day 1 to day 15 after succession. The excess returns are statistically significant for 90 per cent of the days from day 14 to day 2 before and day 2 to day 15 after a political succession. The study found that tile magnitude of short-run price reactions to political succession is high. Market capitalization and index grew by 1.34 percent and 1.08 per cent respectively after a political succession. While market capitalization as a proportion of the GDP increased to 15.07 percent after political succession, foreign portfolio investment as a proportion of the GDP fell to 0.74 percent. Overall, political succession has a positive impact on capital market performance and market valuation of firms in Nigeria.
Keywords: Political succession, capital market, capitalization, stocks, Nigeria

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