Stock Market Response to Terrorist Attacks: An Event Study Approach

Abstract

The purpose of this research study is to examine the stock market's response to terrorist attacks. The study uses data of terrorist attacks in different parts of the country (Pakistan) from June 1, 2014 to May 31, 2017. The event window procedure applies to a 16-day window in which 5 days before and 10 days after the attack. In addition, several event windows have been built to test the response of the Pakistan Stock Exchange. KSE-100 index is taken as proxy of response. The total terrorist attacks are classified into four categories: attacks on law enforcement agencies, attacks on civilians, attacks on special places and attacks on politicians, government employees and bureaucrats. The standard market model is used to estimate the abnormal return of the Pakistan Stock Exchange, which takes 252 business days each year. Furthermore, BMP test is used to check statistical significance of cumulative abnormal rate of return (CAAR). The results of this study reveal that total number of terrorist attacks and attacks on law enforcement agencies show long-term effects on Pakistan stock exchange. However, attacks on civilians, attacks on special places and attacks on politicians, government employees and bureaucrats have little effect on the Pakistan Stock Exchange.

Mitigating Uncertainty in the Boardroom: Analysis to Financial Reporting for Financial Risk COVID-19

“…The repetitive process of random sampling continues until three files with the necessary data are obtained. Random sampling has been very conversant with the study as the research has been characterized by main components which are IFRS and COVID-19 (Tahir et al, 2020). The data sampling outcomes have provided the final data used in determining the adjusted IFRS principles that align with COVID-19 conditions.…”

“…The selection of the samples was universal. According to Tahir et al (2020), IFRS was the critical determinant of global financial reporting according to the files selected for evaluation.…”

“…International Financial Reporting Standards (IFRS) is a body that sets policies and common rules to safeguard the integrity of describing the financial performance of firms so to adjust some of the policies to suit the financial accounting and reporting procedure. The conditions of the COVID-19 are creating challenges in financial markets in terms of accounting and reporting uncertainties (Tahir et al, 2020;Alhamdi et al, 2019). For example, hospitality, leisure, travel entities, and e-commerce operations are declining due to COVID-19 effects on their financial accountability.…”

“…(Fernandes, 2020). Therefore, this factor is a going concern in IFRS for financial reporting and accountability (Tahir et al, 2020).…”

“…The impacts on financial accounting and reporting procedures have affected companies' focusing on strategizing models (Fernandes, 2020;Hadi et al, 2018). Governance of financial resources has been difficult due to the requirement of changes to IFRS across various industries thereby necessitating costly adjustments in order to merge with new methods of reporting financial outcomes of firms (Tahir et al, 2020). Therefore, for adjustments to circumstances for the continuation of reporting of the financial outcomes of companies appropriately, IFRS policies have created adjustments procedure between the existing conditions and COVID-19 consideration (Duong et al, 2020).…”