The Power of the Street: Evidence from Egypt’s Arab Spring

Abstract

During Egypt’s Arab Spring, unprecedented popular mobilization and protests broke down Hosni Mubarak’s government, and ushered in an era of competition between three groups: elites associated with Mubarak’s National Democratic Party (NDP), the military, and the Islamist Muslim Brotherhood. Street protests continued to play an important role during this power struggle. We show that these protests are associated with differential stock market returns for firms connected to the three groups. Using daily variation in the number of protesters, we show that more intense protests in Tahrir Square are associated with lower stock market valuations for firms connected to the group currently in power relative to non-connected firms, but have no impact on the relative valuations of firms connected to other powerful groups. Because these results are not driven by changes in formal political institutions or by the fall of governments, we interpret them as providing evidence that popular mobilization and protests might have a role in restricting the ability of connected firms to capture excess rents under weak institutions. We also show that social media played an important role in these protests, though they had no direct effect on rents (or stock market participants’ perceptions of rents), and further document that the cohesiveness of the opposition as measured from social media activity determines the effectiveness of protests at limiting rents.