Cryptocurrency-Related Announcements and Stock Returns: Emerging Market Evidence

Abstract

This study examines investors’ reactions to crypto-related announcements by public firms in an emerging market. The sample firms are divided into two groups, direct and indirect, based on their level of investment commitment in cryptocurrency. We contribute to the literature by presenting empirical evidence of short-term abnormal returns surrounding the crypto-related announcement day, indicating positive reactions from investors in an emerging market. Firms investing directly in cryptocurrency are associated with higher abnormal returns than those investing indirectly. Additionally, direct-investment firms become more correlated with and sensitive to Bitcoin price movements after crypto-related announcements, indicating a stronger tie with the cryptocurrency market. In light of these results, investors and market participants are reminded to monitor the evolving relationship between firms investing in cryptocurrencies and their stock performance and the potential spillover effects on broader financial markets in emerging economies.