Conflict and Firms’ Performance: A Global View

Emanuele Brancati, Michele Di Maio, Roberta V. Gatti and Asif Islam

No 10898, Policy Research Working Paper Series from The World Bank

Abstract: This study provides a global analysis of the effect of conflict exposure on firms’ performance, combining geolocalized longitudinal firm-level data and information on political violence events from 91 countries between 2006 and 2019. Higher conflict exposure does not affect firm profits, as it reduces both sales and total costs. Sales decline due to the conflict-induced reduction in the availability of production inputs and the increase in informal competition. Firms react to lower sales by reducing labor costs and expenditure on other production inputs. The effect of conflict is more detrimental for firms in countries with low-quality bureaucracy and that are initially at peace.

Date: 2024-09-05
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