Financial impact of a political crisis : the case of Catalonia (Spain)
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- Master Thesis 
The aim of this master thesis is to investigate how the increased uncertainty in the conflict in Catalonia from 2010 to 2018 has impacted the financial markets in Spain. In doing so, the event study methodology is applied examining the 24 most predominant events over the companies listed on the Spanish Stock Exchange (BME). To understand the complexity of the financial impact, the quantitative results are discussed in light of qualitative interviews with 6 experts in the field. The results indicate that there is a short-term financial impact in relation to the Oct. 1st, 2017 referendum. The cumulative abnormal returns reveal that IBEX35 performs worse than DAX and FTSE100, with a different impact across economic industry sectors and a larger adverse impact for firms with headquarters in Barcelona and Madrid than firms with headquarters elsewhere. By looking at the overall impact of the remaining events, there is not enough evidence to suggest that these have made a significant financial impact. However, there is a negative short-term impact for companies that have decided to move their headquarters out of Catalonia, but they recover quickly without a prolonged effect. The qualitative interviews reveal that the limited financial impact has two main explanations. The first reason is that most Catalan firms have a broad international geographic diversification. This creates less risk exposure towards the risen uncertainty in Catalonia and a potential sales reduction in the rest of Spain, as the firms can enter foreign markets to minimize their risk exposure. The second reason is that there is a tendency to strictly separate business and politics, prohibiting discussing the topic during work hours and wearing political symbols in the office. This helps to explain why the financial impact is not of a substantial character, since business continues as usual despite the increased uncertainty in the economy.