Wednesday, October 21, 2020

An executive order worth $100 billion: The impact of an immigration ban’s announcement on Fortune 500 firms’ valuation


A new study from the Brookings Institution authored by Dany Bahar, Prithwiraj Choudhury and Britta Glennon shows that President Trump’s June executive order restricting entry to skilled foreign workers caused a negative impact to the valuation of Fortune 500 firms equivalent to over $100 billion in losses. “While there may be such long-run adjustments that firms can make when access to skilled labor supply is abruptly constrained, we document that there is a significant short-run negative impact,” they write. “In this particular instance, the June 22, 2020 immigration ban plausibly eroded valuation to the tune of 100 billion dollars for the firms in our sample.” Read the full working paper here.

Here is the abstract to the paper:

"On June 22, 2020, President Trump issued an Executive Order (EO)that suspended new work visas, barring nearly 200,000 foreign workers and their dependents from entering the United States and preventing American companies from hiring skilled immigrants using H-1B or L-1 visas.Exploiting this shock, and using event study methodology analyzing the cumulative average abnormal returns (CAARs) of Fortune 500 companies following this order, we find that the EO statistically and economically significantly caused negative CAARs of up to 0.45%, the equivalent of over 100 billion of US dollars of losses, based on the firms’ valuation be-fore the event. Our results are particularly pronounced for firms that had maintained or increased their reliance on skilled immigrant workers over the prior years."


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