Is it all different now for businesses? An analysis of terrorist attacks on businesses before and after 9/11
by Sanjay Kumar; Jiangxia Liu
International Journal of Decision Sciences, Risk and Management (IJDSRM), Vol. 5, No. 2, 2013

Abstract: This paper analyses business vulnerability from terrorist attacks. We specifically seek to understand the impact of the terrorist attacks of 9/11. An event study analysis reveals that publicly traded companies when attacked lose on an average −0.12% in the stockholder equity in a six-day period following the attack. Attacks in the post-9/11 period resulted in a significantly higher stock decline of −0.70%. Pre-9/11 attacks did not have a significant impact on stock returns. Since 9/11, financial vulnerability of businesses from terrorist attacks has increased. Investors have become more risk averse to terrorist attacks. A time series structural break analysis on terrorist attack frequency reveals three breakpoints. The first two breakpoints, in 1997 quarter 4 and 2004 quarter 2, reveal a significant increase in frequency of attacks on businesses. The attacks increased about five-fold in pre-1997 to post-2004 periods. When 9/11 is prejudged as a breakpoint, the frequency of attacks increased two-fold. Terrorists are choosing businesses as targets with an increasing frequency. The rise started before 9/11 and continued afterwards.

Online publication date: Mon, 30-Jun-2014

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