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Is it all different now for businesses? An analysis of terrorist attacks on businesses before and after 9/11

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  • Sanjay Kumar
  • Jiangxia Liu

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.

Suggested Citation

  • Sanjay Kumar & Jiangxia Liu, 2013. "Is it all different now for businesses? An analysis of terrorist attacks on businesses before and after 9/11," International Journal of Decision Sciences, Risk and Management, Inderscience Enterprises Ltd, vol. 5(2), pages 124-141.
    • Handle: RePEc:ids:ijdsrm:v:5:y:2013:i:2:p:124-141
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    Cited by:

    1. Irshad Hira & Taib Hasniza Mohd & Hussain Haroon & Hussain Rana Yassir, 2023. "Conventional and Islamic Equity Market Reaction Towards Terrorism: Evidence Based on Target Types, Location and Islamic Calendar Months," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 33(4), pages 70-116, December.
    2. Hira Irshad & Hasniza Mohd Taib, 2017. "A Comparative Analysis of Effects of Terrorism on World Equity Markets," International Journal of Business and Administrative Studies, Professor Dr. Bahaudin G. Mujtaba, vol. 3(6), pages 202-208.

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