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

Mirko Draca, Jason Garred (), Leanne Stickland and Nele Warrinnier
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Mirko Draca: University of Warwick
Leanne Stickland: National Audit Office, UK Government
Nele Warrinnier: Faculty of Economics and Business, KU Leuven

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

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:

New Economics Papers: this item is included in nep-ara and nep-cwa
Date: 2018
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