Terrorism and Firm Performance: Empirical Evidence from Pakistan

Abstract

A secure business environment for private enterprises is desired by all states and is endorsed as a part of United Nation’s sustainable development goals. However, the risk exposure of private enterprises against terrorism, particularly in developing countries, is not adequately studied. Using Enterprise Surveys (ES) data for more than 2000 firms located across the four provinces of Pakistan, this paper studies the link between the risk of terrorism and firm performance. It finds, after controlling for various firm specific performance determinants as well as provincial and sector specific heterogeneities, that terrorism has a significant negative effect on firms’ performance which is independent of firm size. This effect is robust against different specifications and estimation methods including instrumental variables strategy. Beyond much explored aggregate consequences, terrorism has direct consequences for production processes at micro level.

Terrorism as Socio-Economic and Cultural Barriers to Indonesian Firms’ Financial Performance

“…We enhanced the model by considering terrorism as an influencing factor in the firm's financial performance via the abovementioned production factors. Moreover, while conducting the current study, we followed the guidelines of Mazhar (2018) regarding the influence of terrorism on firms' financial performance.…”

Mapping terrorism in the academic landscape of business field of study: a bibliometric study of the past 30 years

“…Impact of terrorism on tourism/15 articles , , , , , , (Gut and Jarrell, 2007), (Corbet et al, 2019), (O'connor et al, 2008), (Walters et al, 2019), (Voltes-Dorta et al, 2016, , (Kiliclar et al, 2018), (Karamelikli et al, 2019), (Goldman and Neubauer Shani, 2017) 15 4 Impact of terrorism on stock market return/15 articles , , , , , , (Kollias et al, 2011), , (Kollias et al, 2011), (Kollias et al, 2013), (Essaddam and Karagianis, 2014), , (Park and Newaz, 2018), (Shahzad et al, 2017), (Shaikh, 2019) 15 5 Impact of terrorism on MNCs/25 articles , , (Ito and Lee, 2005), (Goodrich, 2002), (Sandler and Siqueira, 2006), (Gassebner and Luechinger, 2011), , (Azam and Thelen, 2008), , (Bader and Berg, 2014), (Reade, 2009), , , , (Chaikin, 2009), , , , (Harvey et al, 2019), , (Tingbani et al, 2019), (Khan et al, 2018), , (Mazhar, 2019), 25 6 Political instability, terrorism and impact on business/13 articles , (Saha and Yap, 2014), , , , , (Raza and Jawaid, 2013), (Bader and Schuster, 2015), ,…”

Insecurity versus immaturity: estimating the link between organizational age and indirect risks

“…In addition, it weakens the agents' democratic preferences (Rehman and Vanin, 2017) and reduces households' well-being (Gaibulloev et al , 2019). More recent studies document negative consequences of terrorism and conflict on entrepreneurship in Pakistan (Mazhar, 2019; Kwong et al , 2019). The focus of this paper on the performance and survival of formal firms of differing ages in a risk-ridden setting of Pakistan is new.…”

“…Another contribution of the study is to the literature dealing with local consequences of terrorism, the area that deserves greater attention (Desai, 2017). To many scholars, local evidence better captures the persistence associated with risks posed by terrorism (Greenbaum et al , 2007; Rehman and Vanin, 2017; Mazhar, 2019; Ocal and Yildirim, 2010). The findings of this study are unique in estimating the risk of terrorism at local level in a uniform sociocultural and economic background for firms operating in Pakistan.…”