The Power of the Street: Evidence from Egypt's Arab Spring
During Egypt's Arab Spring, unprecedented popular mobilization and protests brought down Hosni Mubarak's government and ushered in an era of competition between three groups: elites associated with Mubarak's National Democratic Party (NDP), the military, and the Islamist Muslim Brotherhood. Street protests continued to play an important role during this power struggle. We show that these protests are associated with differential stock market returns for firms connected to the three groups. Using daily variation in the number of protesters, we document that more intense protests in Tahrir Square are associated with lower stock market valuations for firms connected to the group currently in power relative to non-connected firms, but have no impact on the relative valuations of firms connected to other powerful groups. We further show that activity on social media may have played an important role in mobilizing protesters, but had no direct effect on relative valuations. According to our preferred interpretation, these events provide evidence that, under weak institutions, popular mobilization and protests have a role in restricting the ability of connected firms to capture excess rents.
We thank Jesse Shapiro, Matt Gentzkow, Nancy Quian, Larry Katz, Laurence van Lent, Erik Meyersson, Mohamed Mostagir, Jacopo Ponticelli, and Antoinette Schoar for helpful comments. We also thank Karim Ouda (CEO of 25trends.me) for providing a valuable list of Twitter users, and thank seminar participants the University of Chicago, CIFAR, Duke University, IIES Stockholm, IfW Kiel, Stanford, Yale, and the NBER Political Economy meeting for valuable discussions. Leland Bybee, Xavier Jaravel, Racha Khalil, Chris Natoli, Souzan Mansour, Siladitya Mohanti, and Hongcen Wei provided excellent research assistance. All mistakes remain our own. Hassan is grateful to the Fama-Miller Center at the University of Chicago for providing financial support. Acemoglu gratefully acknowledges financial support from ARO MURI W911NF-12-1-0509. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Daron Acemoglu & Tarek A. Hassan & Ahmed Tahoun, 2018. "The Power of the Street: Evidence from Egypt’s Arab Spring," The Review of Financial Studies, vol 31(1), pages 1-42. citation courtesy of