at time _t_ and takes the value 1 when _t_ equals _τ_ and zero otherwise, with _τ_ between _t_ 1 _> t_ 0 and _t_ 2 _,_ which denote the beginning and end of the event window in calendar time, and _εi,t_ is an error term that is correlated across rms in a given day but assumed independent across days. The parameters _α_ , _β_ , _γ_ , _θ_ , and _δ_ are coecients to be estimated. The coecients of interest are the _δτ_ associated with the event-time dummies, which capture the abnormal returns of the company during the event window.

Under the hypothesis that the event under study has a positive impact on parent companies' returns, the _δτ_ coecients should be signicantly positive around or immediately after the event date, and the cumulative abnormal return (CAR), dened as should be signicantly increasing during the event window. The event study literature typically privileges the analysis of the _CAR_ because the cumulative impact of the events is easier to visualize; this convention is followed in the rest of the paper.

Two aspects of this identication strategy deserve further discussion. First, the impact of events aecting a subsidiary on the value of its parent company depends on the relative importance of the former for parent's earnings. If the subsidiary is small relatively to the parent, even a large change in the its value will result in a small change in parent's returns that may be hard to separate from normal return uctuations using statistical procedures. This means that tests based on the response of parents' returns could have low power, which would tend to bias the results against nding a signicant abnormal return as a result of the events under consideration. This is precisely the reason for this paper's focus on South African multinationals with operations in HIPC countries, which are smaller than other multinationals operating in these countries. For instance, the median assets of South African multinationals operating in Ghana were about US$ 8 bn in 2006. In contrast, the largest multinationals operating in Ghana in various industries are Royal Dutch Shell PLC., Barclays PLC., and Nestle SA., all with hundreds of billions of dollars in assets. Furthermore, the reduced power of standard estimation can be signicantly improved by complementing standard results with non-parametric tests with better power properties in small and non-normal samples. Second, event studies rely on the ecient market assumption that news that impacts the value of the rm is quickly incorporated in stock prices. This assumption requires transparent and liquid stock markets. While the JSE is smaller in absolute terms and more illiquid than developed countries' stock markets, it is one of the largest emerging stock markets, with a market capitalization of 1.6 times its GDPmuch larger than that of countries like the US, and also one of the most liquid, with a market turnover value similar to Singapore. Moreover, South Africa fares well among emerging markets in terms of investor rights and corporate governance indexes, with a creditor rights index of 3 out of 4 according to Djankov et al. (2007), and an active program to improve corporate governance.

Information on parent-subsidiary relations comes mainly from McGregor (2006)Who Owns 9