Terrorism and Country-Level Global Business Failure

This paper contributes to the literature on business failure by investigating the relationship between terrorism and country-level global business failure by using a sample of 174 countries over the period 2009–2015. To proxy for business failure, the ‘Resolving Insolvency’ index, which is a component of the World Bank’s ‘Doing Business’ index, was adapted and used. The results of the fixed-effects estimation show that terrorism has a positive and significant relationship with business failure for the full sample. When the sample is divided into developed, developing and fragile states, the results show that terrorism is positively and significantly related with business failure in developing and fragile states only. Estimates show that for every 100 terrorist incidents, business failure increases by 1% and 0.7% points, in South Asia and Sub Saharan Africa (SSA) countries, respectively. The findings contribute to our understanding of the effects of terrorism on business failure, and how this differs depending on whether the country is developing, developed, or is a fragile state.