Does long-term investment really pay off? Evidence from listed mining firms in Canada
Date
2021
Authors
Li, Y.
Xu, L.
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Wendt, K.
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Book chapter
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Source details - Title: Green and Social Economy Finance: A Review, 2021 / Wendt, K. (ed./s), Ch.10, pp.155-170
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Given its growing demand and increasingly important roles in sustaining social and economic growth, the mining sector has in recent decades attracted historical attention and transnational investments. We examine the long-term investment returns of 93 listed mining firms on Toronto Stock Exchange (TSX) between 2010 and 2017. Through measurements of cumulative average adjusted returns (CARs), buy-and-hold abnormal returns (BHARs) and Capital Asset Pricing Model (CAPM), we find that mining firms on average underperform by -6.13, -11.94 and -22.96 per cents in the market respectively in one-, three- and five-year windows after listing. However, mining firms of bigger market cap demonstrate better post-listing performance than those of smaller market cap. Such underperformance may be related to the overpriced initial public offerings (IPOs) and institutional settings of the Canadian stock market. Our findings are meaningful towards both policy makers and investors that long-term investment may be underperforming even with an expanding sector in a developed capital market.
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Copyright 2021 CRC Press