Abstract
This paper contributes to empirical literature testing the importance of secure formal legal rights for efficient natural resource exploitation and the promotion of economic growth and development. We use an event study methodology to estimate the market response to a series of six landmark Supreme Court of Canada decisions that reinterpreted aboriginal rights in Canada, providing a shock to the stability and security of the existing entitlements of Canadian resource firms. The paper expands on our earlier study of Canada’s Forest industry to test claims that recognition of aboriginal rights has created uncertainty imposing significant economic costs on Canada’s resource industries. We construct a new data set containing all firms listed on the TSX operating in the Forestry, Mining, and Energy sectors. Using this data set of 2,410 firm-events and corresponding firm level micro-data we provide evidence of the market response to the decisions for the resource sector globally, by industry and across firm characteristics. Our results show that the decisions generated statistically and economically significant effects, and generally support the importance of secure legal rights to the economic performance of resource industries. However, the effects vary in size and direction across decisions, industries, and firm-types.
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