Hurting without Hitting: The Economic Cost of Political Tension

He, Yinghua, Nielsson, Ulf and Wang, Yonglei (2014) Hurting without Hitting: The Economic Cost of Political Tension. TSE Working Paper, n. 14-484

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Official URL: http://tse-fr.eu/pub/28077

Abstract

Political tension causing diplomatic strains rarely escalates into direct violence or war. This paper identifies the economic effects of such non-violent political tension by examining Taiwan’s sovereignty debate. Non-violent events harming the relationship with mainland China lead to an average daily drop of 200 basis points in Taiwanese stock returns. The impact is more severe on firms openly supporting the Taiwanese pro-independence party. Through a series of tests we identify this economic penalty as initiated by mainland authorities, who specifically target political opponents that are economically exposed to mainland China via either investments or exports.

Item Type: Monograph (Working Paper)
Language: English
Date: April 2014
Uncontrolled Keywords: political tension, political connections, China, Taiwan
JEL codes: F51 - International Conflicts; Negotiations; Sanctions
G14 - Information and Market Efficiency; Event Studies
G15 - International Financial Markets
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 09 Jul 2014 17:43
Last Modified: 07 Mar 2018 13:22
OAI ID: oai:tse-fr.eu:28077
URI: http://publications.ut-capitole.fr/id/eprint/15880

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