The financial impact of terrorist attacks on the value of the oil and gas industry: An international review

Abstract

Energy firms operate in a strategic industry and their operations are vulnerable to terrorist attacks. We investigate how terrorism impacts stock returns of these firms. We analyze the effect of 105 terrorist attacks on oil and gas companies during 2001-2012. We find that there is no evidence that shareholders respond in a significant manner to these attacks. The reason may be that financial market participants are already got used to terrorism and that attacks on oil and gas companies occurring on a large scale and, therefore, are already included in the risk premium. As such, the financial market participants seem to assume that firms already efficiently manage the threat of terrorism in the energy industry. We conclude that financial markets seem to be efficient in absorbing the impact of terrorist attacks.