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On Target? The Incidence of Sanctions Across Listed Firms in Iran

Author

Listed:
  • Draca, Mirko

    (University of Warwick)

  • Garred, Jason

    (University of Ottawa)

  • Stickland, Leanne

    (National Audit Office, UK Government)

  • Warrinnier, Nele

    (Faculty of Economics and Business, KU Leuven)

Abstract

A central premise of current international sanctions policy is targeting, that is, concentrating the impact of sanctions on specific, politically influential groups in the sanctioned country. However, many economic factors make it difficult for senders of sanctions to hit these targets. We offer evidence on the efficacy of targeting in the case of Iran, where sanctions aimed to affect a well-defined set of political entities through their economic interests. Our identification strategy focuses on the process of negotiations for sanctions removal. We find that stock returns of firms owned by targeted political groups and firms unrelated to these groups both react positively to information indicating progress in diplomatic negotiations. However, these effects are significantly larger for firms owned by targeted groups. This evidence suggests that good news about sanctions relief yielded particularly large economic benefits for targeted political entities, consistent with the ‘income targeting’ goal of sanctions policy against Iran.Keywords: JEL Classification:

Suggested Citation

  • Draca, Mirko & Garred, Jason & Stickland, Leanne & Warrinnier, Nele, 2018. "On Target? The Incidence of Sanctions Across Listed Firms in Iran," CAGE Online Working Paper Series 372, Competitive Advantage in the Global Economy (CAGE).
  • Handle: RePEc:cge:wacage:372
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    References listed on IDEAS

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    Cited by:

    1. Felbermayr, Gabriel & Syropoulos, Constantinos & Yalcin, Erdal & Yotov, Yoto, 2019. "On the Effects of Sanctions on Trade and Welfare: New Evidence Based on Structural Gravity and a New Database," School of Economics Working Paper Series 2019-3, LeBow College of Business, Drexel University.
    2. Philippe Aghion & Ralph Haas & Guido Friebel & Sergei Guriev & Jan Luksic, 2017. "Introduction to the Special Issue on the Economics of the Middle East and North Africa," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 25(2), pages 141-148, April.
    3. Thiemo René Fetzer & Carlo Schwarz, 2019. "Tariffs and politics: evidence from Trump's trade wars," CESifo Working Paper Series 7553, CESifo.
    4. Daniel P. Ahn & Rodney D. Ludema, 2019. "The sword and the shield: the economics of targeted sanctions," CESifo Working Paper Series 7620, CESifo.
    5. Fetzer, Thiemo & Schwarz, Carlo, 2019. "Tariffs and Politics: Evidence from Trump’s Trade Wars," The Warwick Economics Research Paper Series (TWERPS) 1227, University of Warwick, Department of Economics.
    6. Peeva, Aleksandra, 2019. "Did sanctions help Putin?," Discussion Papers 2019/7, Free University Berlin, School of Business & Economics.

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    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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