Towards a Democratic New Normal? Investor Reactions to Interim‐Regime Dominance during Violent Events

Omar El Nayal, Arjen Slangen, J. (Hans) van Oosterhout and Marc van Essen

Journal of Management Studies, 2020, vol. 57, issue 3, 505-536

Abstract: Although interim regimes in former autocracies are generally tasked with initiating a democratic ‘new normal’, they may privately intend to become their country’s new autocratic rulers. We argue that, to cope with the uncertainty stemming from this possibility, investors infer an interim regime’s intentions from the dominance displayed by the regime during government‐related violence, as reflected in the share of civilian fatalities. Specifically, we propose that investors interpret higher interim‐regime dominance as a signal of weaker democratic intentions and associate such weaker intentions with a gloomier political outlook for local firms. We therefore hypothesize that investors react more negatively to violent events characterized by higher interim‐regime dominance. We also hypothesize a less negative effect of such dominance for firms with larger foreign footprints, lower indebtedness, or more concentrated ownership, since investors will likely consider such firms more resilient to political deterioration. Applying event study methodology to 94 spells of violence in Egypt during the Arab Spring, we find substantial support for our hypotheses, thus contributing to management research on investor decision‐making, violence, and political uncertainty.

Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/joms.12553

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jomstd:v:57:y:2020:i:3:p:505-536

Ordering information: This journal article can be ordered from
http://www.blackwell ... s.asp?ref=00022-2380

Access Statistics for this article

Journal of Management Studies is currently edited by Timothy Clark, Steven W. Floyd and Mike Wright

More articles in Journal of Management Studies from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().