Diamonds are Forever, Wars are Not - Is Conflict Bad for Private Firms?

By Massimo Guidolin, Eliana La Ferrara. 2005

313 citations recorded by the source corpus.

This Paper studies the relationship between civil war and private investment 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 also use nonparametric techniques with daily data on the intensity of conflict, and find that moderate levels of violence increased the abnormal returns of the ‘Angolan’ portfolio. We interpret our results in the light of the widespread rent seeking in the Angolan mineral industry.

Subfields: Economics and Econometrics, Information Systems, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/ea39cea399dd85020cdd2f957f2d31ee7eb5983c

Citations in the corpus

• Commodity Price Shocks and Civil Conflict: Evidence from Colombia (2013, unknown): “[43] Guidolin, Massimo and Eliana La Ferrara.”
• This Mine is Mine! How Minerals Fuel Conflicts in Africa (2015, unknown): “15 15 Guidolin and La Ferrara ( 2007 ) actually find evidence that conflicts increase the value of extractive firms.”
• Civil War, Crop Failure, and Child Stunting in Rwanda (2007, unknown): “We use an integrated household survey, combining health and agricultural data with event data from reports by nongovernmental organizations.”
• Coups, Corporations, and Classified Information (2008, unknown): “5 Our sample of coups includes five such covert attempts.”
• Estimating the Peace Dividend: The Impact of Violence on House Prices in Northern Ireland (2009, unknown): “The peace process took a further leap forward in July 28, 2005 when the IRA made a public statement ordering an end to the armed campaign and instructing its members to dump arms and to pursue purely political means.”