Does terrorism hamper FDI inflows? A pre and post 9/11 analysis

Arif, Imtiaz; Rawat, Amna Sohail; Khan, Lubna

doi:10.1108/jes-12-2019-0571

Cited by 9 publications

(8 citation statements)

References 53 publications

(54 reference statements)

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“…The empirical analysis presents us with a number of statistical difficulties. First, there is the potential endogeneity of terrorism and FDI (Arif, Rawat, and Khan 2020; Bandyopadhyay, Sandler, and Younas 2014). Second, our theory is predicated on FDI increasing economic outcomes, which requires us to show a mediating relationship.…”

Section: Methodsmentioning

confidence: 99%

“…Furthermore, countries that engage in successful counter-terrorism efforts, and see a reduction in terror, are often rewarded with increased FDI (Bandyopadhyay, Sandler, and Younas 2014). Such concerns are particularly relevant to the most terror-effected economies, as they have primarily been shut out of the FDI marketplace (Arif, Rawat, and Khan 2020).…”

Section: Methodsmentioning

confidence: 99%

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The Double-Edged Sword of Foreign Direct Investment on Domestic Terrorism

Biglaiser

Hunter

McGauvran

2023

Journal of Conflict Resolution

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This paper studies the effects of foreign direct investment (FDI) on domestic terrorism. Using a cross-national, time-series analysis of 114 countries from 1991–2017, and employing structural equation modeling to test a number of mediating factors, we find that the impact of FDI on domestic terrorism depends on the host state’s level of economic development. For host countries at higher-income levels, FDI boosts economic development and global integration promoting prosperity, increasing counterterrorism resources, and reducing the economic grievances that foster terrorism. Conversely, for lower-income host countries, increased FDI fuels higher domestic terrorism, as it intensifies clashes between traditional and modern elements within society, raises economic discrimination, heightens perceptions of economic insecurity, and subsequently leads to grievances directed against the state. Our results indicate a curvilinear relationship between FDI inflows and domestic terrorism, suggesting that FDI produces a double-edged sword between promoting economic development and increasing domestic terrorism in host states.

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Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

The Double-Edged Sword of Foreign Direct Investment on Domestic Terrorism

Biglaiser

Hunter

McGauvran

2023

Journal of Conflict Resolution

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“…Likewise, research has found that both business and non-business targeted terrorist attacks reduce foreign investment (Dimitrova et al, 2022), even more so than natural disasters, and specifically in developing nations (Bandyopadhyay et al, 2014). Despite the theoretical arguments consistently positing that terrorism is perceived negatively by MNEs, some scholars have found that terrorist attacks do not have a direct and significant negative effect on MNEs' investments, at least in more recent years and in certain industries (Arif et al, 2021;Liu and Li, 2020;Skovoroda et al, 2019).…”

Section: Violent Political Riskmentioning

confidence: 99%

What’s in a name (political risk)? A review of political risk and foreign investment decisions

DeGhetto

2024

CCSM

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PurposeThere is an extensive research stream devoted to evaluating host country political risk as it relates to foreign investment decisions, and in today’s geopolitical climate, this type of risk is becoming increasingly salient to business leaders. Despite notable advancements related to understanding the importance of government-related risk, inconsistent conceptualizations and findings remain. Thus, the purpose of this paper is to offer a comprehensive overview of how host country political risk has been conceptualized, measured and studied in relation to multinational enterprises' (MNEs’) investment decisions. After reviewing the relevant literature, five major aspects of non-violent (government type, public corruption, leadership change) and violent (armed conflict, terrorism) political risk were identified. The organization and review of each aspect of political risk provide insights on fruitful directions for future research, which are discussed.Design/methodology/approachTo identify research articles on political risk and foreign investment, 13 leading management and international business journals were searched using relevant keywords (January 2000 to January 2023). Moreover, reviewing articles from these journals led to locating and reviewing additional relevant articles that the authors cited. Keyword searches were also conducted on Google Scholar and Web of Science in an effort to identify relevant articles outside of the 13 targeted journals.FindingsBoth violent and non-violent aspects of host country political risk have been studied in relation to MNEs' investment decisions. Specifically, five major aspects of host country political risk were identified (government type, public corruption, leadership change, armed conflict and terrorism). Although the general consensus is that risk related to the government often creates obstacles for MNEs, conceptualizations, measures and findings in prior research are not uniform.Originality/valueThis paper provides a comprehensive overview of host country political risk and foreign investment. In doing so, the aspects of political risk are identified, organized and overviewed.

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“…Hyeong Joon Kim https://orcid.org/0000-0001-9179-4974 NOTES 1 For evidence on the impact of terrorism on macroeconomic outcomes at the industry or national levels, see, for example, Arif et al (2020), Baker (2014), Chen et al (2021), Eckstein and Tsiddon (2004), Tingbani et al (2019), andWaxman (2011). 2 The differences between our study and Lins et al (2017) are the measure of social capital and traumatic events.…”

Section: Orcidmentioning

confidence: 99%

“…1 1 For evidence on the impact of terrorism on macroeconomic outcomes at the industry or national levels, see, for example, Arif et al (2020), Baker (2014), Chen et al (2021), Eckstein and Tsiddon (2004), Tingbani et al (2019), and Waxman (2011). …”

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confidence: 99%

Social capital and stock price crash risk: Evidence from US terrorist attacks

Mun

Kim

2023

Corporate Governance

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Research Question/IssueThis study examines whether social capital's monitoring role intensifies during post‐terrorism periods, as terrorism influences citizens' willingness to change society and increases stakeholder participation. Focusing on firms' stock price crash risk, caused by managers' opportunistic behavior (viz., bad news hoarding), we hypothesize that social capital under terrorism reduces stock price crash risk, as it is expected to play an external monitoring governance role.Research Findings/InsightsUsing US public firms, a county‐level social capital index, and terrorist attacks from 1992 to 2014, we find that social capital surrounding corporate headquarters significantly reduces stock price crash risk during post‐terrorism periods. The results are robust to propensity score matching and instrumental variable regressions, and a battery of sensitivity tests. Overall, we suggest that stakeholders' willingness (that is intensified by terrorism) to monitor firms' bad news hoarding is channeled through social capital. Furthermore, the monitoring role of social capital under terrorism is significant for firms with poor internal monitoring, more institutional investors, less entrenched managers, CEOs preferring bad news hoarding, and accompanied by improvement of analysts' forecasts, suggesting that the impact of external governance may differ by firms' governance characteristics.Theoretical/Academic ImplicationsWe contribute to the corporate governance literature by investigating the role of social capital as external governance. While terrorism brings serious damage and economic costs, our study shows that it gives rise to the increased role of social capital, suggesting a novel perspective that terrorism's unexpected socio‐psychological outcome, being non‐financial social threats, leads to positive corporate behaviors by stimulating stakeholders' willingness to monitor firms. Our study is also consistent with the literature that social capital particularly matters in certain periods, such as traumatic events. Furthermore, the impact of a firm's external monitor differs by its governance characteristics, highlighting the importance of corporate governance.Practitioner/Policy ImplicationsWe suggest that social capital serves as firms' external monitor by restraining managers' bad news hoarding under certain circumstances, providing implications for policymakers and practitioners. According to our results, traumatic events, such as terrorism, could be viewed as the moderator for the impact of social capital on corporates, emphasizing the need for intensifying social capital (or making it more effective) without tragic incidents. Meanwhile, one might view social capital as the mediator for the increased willingness of individuals to monitor during the post‐terrorism period, highlighting the need for sufficient social capital in the local community.

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Does terrorism hamper FDI inflows? A pre and post 9/11 analysis

Cited by 9 publications

References 53 publications

The Double-Edged Sword of Foreign Direct Investment on Domestic Terrorism

The Double-Edged Sword of Foreign Direct Investment on Domestic Terrorism

What’s in a name (political risk)? A review of political risk and foreign investment decisions

Social capital and stock price crash risk: Evidence from US terrorist attacks

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