The microeconomic impact of political instability: Firm‐level evidence from Tunisia

Matta, Samer Naji; Appleton, Simon; Bleaney, Michael

doi:10.1111/rode.12388

Cited by 14 publications

(17 citation statements)

References 52 publications

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“…Hosny (2017), for example, documents that political uncertainty has an adverse causal effect on the sales growth and the employment growth of private firms. Matta et al (2018) also come to similar conclusions when they concluded that political uncertainty had a negative impact on firm-level growth in Tunisia after the Arab Spring uprisings. Given the negative impact of performance, these results would suggest that capital providers would increase their perceived risk whenever they anticipate that firms have greater exposure to political uncertainties.…”

Section: Impact Of Political Uncertainty On Information Disclosure Practicessupporting

confidence: 64%

Political uncertainty and the choice of external audit: international evidence from private firms

Farooq

Satt

Fadel

2020

IJMF

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PurposeThis paper documents the impact of political uncertainty on the decision of private firms to use external auditors to verify their financial statements.Design/methodology/approachThe authors use the data from 141 countries and the pooled logistic regression to test our arguments. The data is provided by the World Bank's Enterprise Surveys and is collected during the period between 2006 and 2019.FindingsThe results show that firms with high exposure to political uncertainty are more likely to use external auditors to verify their financial statements. The results are robust across various sub-samples and hold when we use alternate proxy for political uncertainty. The results are also robust after controlling for potential endogeneity concerns. The authors also find that the effect of political uncertainty on the choice of external audit is more pronounced for firms that are headquartered in countries with weak institutional environment. The authors document significant role of democracy, rule of law and accountability in determining the relationship between political uncertainty and the choice of external audit.Originality/valueThe authors believe that theirs is one of the initial attempts (if not the first) to investigate the effect of political uncertainty on the choice of external audit among the private firms in developing countries.

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Section: Impact Of Political Uncertainty On Information Disclosure Practicessupporting

confidence: 64%

Political uncertainty and the choice of external audit: international evidence from private firms

Farooq

Satt

Fadel

2020

IJMF

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“…Concerning the disruption of the productive sector, political instability reduces the productivity and competitiveness of firms because of higher production costs and the decrease in human capital investment (Collier & Duponchel, 2013; Sayre, 2010). To cope with the losses, employers usually lay off their employees or put them on layoff (Matta et al., 2018). Lim (1997) finds that enterprises in the tourism sector are generally the most vulnerable to political instability.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

“…In recent decades, there has been substantial literature on issues related to the consequences of political instability. Much of this literature has focused on the impact of political instability on economic growth (Alesina et al., 1996; Fosu, 1992; Jong‐A‐Pin, 2009; Okafor, 2017); firm performance (Matta et al., 2018); inflation (Aisen & Veiga, 2006); human capital (Fedderke & Klitgaard, 1998; Klomp & de Haan, 2013); and other macroeconomic indicators such as exports, private investment, and foreign direct investment (FDI) (Carmignani, 2003; Fosu, 2003). These studies argue that political instability generates uncertainty that discourages investors, leads to inflation volatility, and disrupts government and business development agendas, which adversely affect economic performance.…”

Section: Introductionmentioning

confidence: 99%

Political instability and youths unemployment in sub‐Saharan Africa

Kamga

Fokam

Ningaye

2022

Review Development Economics

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The main objective of this study is to analyze the effect of political instability on youths unemployment in sub-Saharan Africa. Particular interest is devoted to the channels through which political instability affects youths unemployment. The empirical analysis covers a sample of 23 countries for the period 2000-2016.To better characterize the labor market framework in sub-Saharan Africa, the empirical analysis incorporates the impact of political instability on youths underemployment and labor underutilization. Using panel data techniques, the results show that political instability increases youths unemployment, underemployment, and labor underutilization in sub-Saharan Africa. The main transmission channels identified are foreign direct investment, domestic investment, gross domestic product, government spending, human capital, and labor market flexibility. The findings confirm the investigated hypothesis. As the main policy implication, policymakers in sub-Saharan Africa should resolve political instability as a priority toward addressing youths unemployment.

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“…Finally, mass civil protests are often associated with crime events such as theft, vandalism and robbery (Roberts, 2012; Roman, 2013; Tadjoeddin, 2013) which would have a direct negative effect on business confidence and investment. For instance, during and after the 2011 Tunisian revolution, political instability was a major constraint on firms located in the interior region of Tunisia which experienced the highest number of protests and strikes (Matta et al, 2018). Unfortunately, we cannot empirically investigate the validity of this channel as we do not have firm‐level data that span across all countries and time periods.…”

Section: Theory and Literature Reviewmentioning

confidence: 99%

The economic impact of political instability and mass civil protest

Matta

Bleaney

Appleton

2021

Economics & Politics

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An extensive literature has examined the economic effects of non‐violent political instability events. Nonetheless, the issue of whether economies react differently over time to such events remains largely unexplored. Using synthetic control methodology, which constructs a counterfactual in the absence of political instability, we estimate the output effect of 38 regime crises in the period 1970–2011. A crucial factor is whether crises are accompanied by mass civil protest. In the crises accompanied by mass civil protest, there is typically an immediate fall in output which is never recovered in the subsequent five years. In crises unaccompanied by protest, there are usually no significant output effects. It is unclear, however, whether mass civil protest causes the greater fall in output or is simply an indicator of a more severe political crisis.

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The microeconomic impact of political instability: Firm‐level evidence from Tunisia

Cited by 14 publications

References 52 publications

Political uncertainty and the choice of external audit: international evidence from private firms

Political uncertainty and the choice of external audit: international evidence from private firms

Political instability and youths unemployment in sub‐Saharan Africa

The economic impact of political instability and mass civil protest

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