Firm Performance and their Perception of Political Instability in Egypt: Evidence from an Endogenous Treatment Regression Model

Abstract

This paper employs a unique firm-level data covering for firms in the private sector in Egypt, to analyze whether firms' perception of political instability has an adverse effect on firm performance. The analysis covers 2,897 firms over the period 2009-2012. There are two main results: First, using OLS, we find a negative association between political instability and the growth of firms' sales and employment. Second, using an endogenous treatment linear regression models, to correct for potential endogeneity, we find that political instability can even have a negative causal effect on firms' performance. The results are robust to different specifications.