Title: Is it all different now for businesses? An analysis of terrorist attacks on businesses before and after 9/11
Authors: Sanjay Kumar; Jiangxia Liu
Addresses: Sam and Irene Black School of Business, Pennsylvania State University – Erie, Erie, PA 16563-1400, USA ' Dahlkemper School of Business, Gannon University, Erie, PA 16501, USA
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.
Keywords: risk averse; financial vulnerability; terrorist attacks; 9/11; event studies; supply chain management; SCM; stock decline; stockholder equity; business attacks; stock returns.
International Journal of Decision Sciences, Risk and Management, 2013 Vol.5 No.2, pp.124 - 141
Received: 22 May 2013
Accepted: 22 Jul 2013
Published online: 27 Jan 2014 *