Market reactions of African and non-African firms to changes in the S&P Africa 40 index

We compare the market reactions of African and non-African firms that are added to or deleted from S&P Africa 40, an index of large firms with the majority of their operations on the continent. Both African and non-African additions (deletions) experience permanent stock price gains (losses) around the S&P Africa 40 index revisions. Importantly, we find significant differences in abnormal returns between African and non-African deletions, but not additions. These differences remain robust even when controlling for institutional ownership, size, leverage, profit margin, and capital expenditure variables. Contrary to the predictions of the investor awareness hypothesis, we find no significant differences in cumulative abnormal returns between new and repeated African additions, and we observe a permanent stock price decline for new African deletions.