Abstract
AbstractThis paper contributes to the literature on business performance by investigating the relationship between terrorism and global business performance at country level. A measure of a country's distance from the frontier score of the World Bank's Doing Business index is used to proxy for business performance. The results of the fixed‐effects estimations based on 173 countries over 7 years (2009–2017) show that terrorism has no significant relationship with global business performance. We then partition our sample into developed, developing and fragile countries. The results still show that there is no robust significant relationship between terrorism and business performance for the sub‐samples of developed and developing countries. However, the results based on the fragile countries' sub‐sample suggest a significant negative relationship between terrorism and business performance. The results are consistent with an alternative measure of business performance and estimation technique that controls for endogeneity.
Highlights
Terrorism incurs significant economic as well as human costs
Our results suggest that terrorism does not affect business performance in either developed or developing countries
The number of fatalities and injured is negative and significant except for the sample of developed countries. These results may confirm the better institutional structures and mechanisms available in developed countries that can help cushion the severity of the impact of terrorism similar to the baseline regression, there is no evidence to suggest that the severity of terrorism will have a greater impact on business performance
Summary
Terrorism incurs significant economic as well as human costs. For example, the global economic impact of terrorism reached US$89.6 billion in 2015, which was only 15% less than the year before—when it was $105.6 billion. The growing economic and human cost of terrorism has led to many empirical studies seeking to establish the impact of terrorism on business performance (e.g., Abadie & Gardeazabal, 2008; Aslam & Kang, 2015; Chen & Siems, 2004; Chesney, Reshetar, & Karaman, 2011; Drakos, 2004, 2010; Graham & Ramiah, 2012; Ito & Lee, 2005; Procasky & Ujah, 2016). Despite the suggestions that terrorism may affect business performance in developing and fragile (failed) countries differently (e.g., Essaddam & Karagianis, 2013; Llorca-Vivero, 2008; Piazza, 2008; Procasky & Ujah, 2016) very few but contradictory studies exist.
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