Diamonds are forever, wars are not. Is conflict bad for private firms?

Massimo Guidolin and Eliana La Ferrara

No 2005-004, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper studies the relationship between civil war and the value of firms in a poor, resource abundant country using microeconomic data for Angola. We focus on diamond mining firms and conduct an event study on the sudden end of the conflict, marked by the death of the rebel movement leader in 2002. We find that the stock market perceived this event as 'bad news' rather than 'good news' for companies holding concessions in Angola, as their abnormal returns declined by 4 percentage points. The event had no effect on a control portfolio of otherwise similar diamond mining companies. This finding is corroborated by other events and by the adoption of alternative methodologies. We interpret our findings in the light of conflict-generated entry barriers, government bargaining power and transparency in the licensing process.

Keywords: Microeconomics; Mineral industries (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Diamonds Are Forever, Wars Are Not: Is Conflict Bad for Private Firms? (2007)
Working Paper: Diamonds are Forever, Wars are Not: Is Conflict Bad for Private Firms? (2004)
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DOI: 10.20955/wp.2005.004

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