Towards a democratic new normal? Investor reactions to interim-regime dominance during violent events

Omar El Nayal, Arjen Slangen, J. van Oosterhout, Marc van Essen*

*Autor correspondente para este trabalho

Resultado de pesquisarevisão de pares

2 Citações (Scopus)

Resumo

Although interim regimes in former autocracies are generally tasked with initiating a democratic ‘new normal’, they may privately intend to become their country’s new autocratic rulers. We argue that, to cope with the uncertainty stemming from this possibility, investors infer an interim regime’s intentions from the dominance displayed by the regime during government-related violence, as reflected in the share of civilian fatalities. Specifically, we propose that investors interpret higher interim-regime dominance as a signal of weaker democratic intentions and associate such weaker intentions with a gloomier political outlook for local firms. We therefore hypothesize that investors react more negatively to violent events characterized by higher interim-regime dominance. We also hypothesize a less negative effect of such dominance for firms with larger foreign footprints, lower indebtedness, or more concentrated ownership, since investors will likely consider such firms more resilient to political deterioration. Applying event study methodology to 94 spells of violence in Egypt during the Arab Spring, we find substantial support for our hypotheses, thus contributing to management research on investor decision-making, violence, and political uncertainty.
Idioma originalEnglish
Páginas (de-até)505-536
Número de páginas32
RevistaJournal of Management Studies
Volume57
Número de emissão3
DOIs
Estado da publicaçãoPublicado - 1 mai 2020

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