Towards a Democratic New Normal? Investor Reactions to Interim‐Regime Dominance during Violent Events
研究投资者如何通过暴力事件中临时政权的主导地位（以平民死亡比例衡量）推断其民主意图，发现主导地位越高，投资者反应越负面，但企业海外业务多、负债低或股权集中时负面影响减弱。
Abstract Although interim regimes in former autocracies are generally tasked with initiating a democratic ‘new normal’, they may privately intend to become their country’s new autocratic rulers. We argue that, to cope with the uncertainty stemming from this possibility, investors infer an interim regime’s intentions from the dominance displayed by the regime during government‐related violence, as reflected in the share of civilian fatalities. Specifically, we propose that investors interpret higher interim‐regime dominance as a signal of weaker democratic intentions and associate such weaker intentions with a gloomier political outlook for local firms. We therefore hypothesize that investors react more negatively to violent events characterized by higher interim‐regime dominance. We also hypothesize a less negative effect of such dominance for firms with larger foreign footprints, lower indebtedness, or more concentrated ownership, since investors will likely consider such firms more resilient to political deterioration. Applying event study methodology to 94 spells of violence in Egypt during the Arab Spring, we find substantial support for our hypotheses, thus contributing to management research on investor decision‐making, violence, and political uncertainty.