Abstract:
PURPOSE – This paper operationalizes insecurity and governance crises to study their effects on stock market
response to two political events in Nigeria – the 2015 and 2019 presidential elections.
DESIGN/METHODOLOGY/APPROACH – An event study was used to capture the market responses. Abnormal
returns at the aggregate and sectoral levels were measured over several time windows before and after the
respective election results were announced.
FINDINGS – The market reacted strongly positively to a change in presidency from an incumbent to an
opposition party candidate in the 2015 election but weakly positively, at best, to the re-election of the incumbent
candidate in the 2019 election. In addition, banking stocks exhibited greater sensitivity to these events than oil
and gas stocks.
RESEARCH LIMITATIONS/IMPLICATIONS – There may be peculiarities with the Nigerian case and with the two
elections analyzed. Therefore, future research could focus on understanding the extent to which the results
generalize to the broader sub-Saharan context and other regions that face similar governance challenges.
PRACTICAL IMPLICATIONS – Understanding that markets may have a different perception towards incumbent
versus opposition candidate electoral victories during periods of insecurity and governance crisis is important
for investors, policymakers, researchers and the wider society.
ORIGINALITY/VALUE – Past empirical studies on political events and stock returns in Sub-SaharanAfrica contexts
such as Nigeria ignore shifts in voter mood and produce contradictory findings. This paper helps to resolve some
of these contradictions by providing insight into how the markets can have a different perception towards
incumbent and opposition candidate electoral victories during periods of insecurity and governance crisis.
