Hurting without Hitting

The Economic Cost of Political Tension

Yinghua He, Ulf Nielsson, Yonglei Wang

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Political tension that causes diplomatic strain rarely escalates into direct violence or war. This paper identifies the economic effects of such non-violent political tension by examining Taiwan’s sovereignty debate. Non-violent events harming the relationship with mainland China lead to an average daily drop of 200 basis points in Taiwanese stock returns. The impact is more severe on firms openly supporting the Taiwanese pro-independence party. Through a series of tests, we show that this economic penalty is targeted at pro-independence firms that are economically exposed to mainland China via either investments or exports.
Original languageEnglish
JournalJournal of International Financial Markets, Institutions & Money
Volume51
Pages (from-to)106-124
Number of pages19
ISSN1042-4431
DOIs
Publication statusPublished - Nov 2017

Keywords

  • Political tension
  • Political connections
  • China
  • Taiwan

Cite this

@article{ebe5fd629ef246a1a6941ea8f3e1b2f5,
title = "Hurting without Hitting: The Economic Cost of Political Tension",
abstract = "Political tension that causes diplomatic strain rarely escalates into direct violence or war. This paper identifies the economic effects of such non-violent political tension by examining Taiwan’s sovereignty debate. Non-violent events harming the relationship with mainland China lead to an average daily drop of 200 basis points in Taiwanese stock returns. The impact is more severe on firms openly supporting the Taiwanese pro-independence party. Through a series of tests, we show that this economic penalty is targeted at pro-independence firms that are economically exposed to mainland China via either investments or exports.",
keywords = "Political tension, Political connections, China, Taiwan, Political tension, Political connections, China, Taiwan",
author = "Yinghua He and Ulf Nielsson and Yonglei Wang",
year = "2017",
month = "11",
doi = "10.1016/j.intfin.2017.08.011",
language = "English",
volume = "51",
pages = "106--124",
journal = "Journal of International Financial Markets, Institutions & Money",
issn = "1042-4431",
publisher = "Elsevier",

}

Hurting without Hitting : The Economic Cost of Political Tension. / He, Yinghua; Nielsson, Ulf; Wang, Yonglei.

In: Journal of International Financial Markets, Institutions & Money, Vol. 51, 11.2017, p. 106-124.

Research output: Contribution to journalJournal articleResearchpeer-review

TY - JOUR

T1 - Hurting without Hitting

T2 - The Economic Cost of Political Tension

AU - He, Yinghua

AU - Nielsson, Ulf

AU - Wang, Yonglei

PY - 2017/11

Y1 - 2017/11

N2 - Political tension that causes diplomatic strain rarely escalates into direct violence or war. This paper identifies the economic effects of such non-violent political tension by examining Taiwan’s sovereignty debate. Non-violent events harming the relationship with mainland China lead to an average daily drop of 200 basis points in Taiwanese stock returns. The impact is more severe on firms openly supporting the Taiwanese pro-independence party. Through a series of tests, we show that this economic penalty is targeted at pro-independence firms that are economically exposed to mainland China via either investments or exports.

AB - Political tension that causes diplomatic strain rarely escalates into direct violence or war. This paper identifies the economic effects of such non-violent political tension by examining Taiwan’s sovereignty debate. Non-violent events harming the relationship with mainland China lead to an average daily drop of 200 basis points in Taiwanese stock returns. The impact is more severe on firms openly supporting the Taiwanese pro-independence party. Through a series of tests, we show that this economic penalty is targeted at pro-independence firms that are economically exposed to mainland China via either investments or exports.

KW - Political tension

KW - Political connections

KW - China

KW - Taiwan

KW - Political tension

KW - Political connections

KW - China

KW - Taiwan

UR - https://sfx-45cbs.hosted.exlibrisgroup.com/45cbs?url_ver=Z39.88-2004&url_ctx_fmt=info:ofi/fmt:kev:mtx:ctx&ctx_enc=info:ofi/enc:UTF-8&ctx_ver=Z39.88-2004&rfr_id=info:sid/sfxit.com:azlist&sfx.ignore_date_threshold=1&rft.object_id=954926245543&rft.object_portfolio_id=&svc.holdings=yes&svc.fulltext=yes

U2 - 10.1016/j.intfin.2017.08.011

DO - 10.1016/j.intfin.2017.08.011

M3 - Journal article

VL - 51

SP - 106

EP - 124

JO - Journal of International Financial Markets, Institutions & Money

JF - Journal of International Financial Markets, Institutions & Money

SN - 1042-4431

ER -