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Cheap Talk? Financial Sanctions and Non-Financial Firms

Besedeš, Tibor ; Goldbach, Stefan ; Nitsch, Volker (2021)
Cheap Talk? Financial Sanctions and Non-Financial Firms.
doi: 10.26083/tuprints-00017631
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Item Type: Report
Type of entry: Primary publication
Title: Cheap Talk? Financial Sanctions and Non-Financial Firms
Language: English
Date: February 2021
Place of Publication: Darmstadt
Series: Darmstadt Discussion Papers in Economics
Series Volume: 239
Collation: 41 Seiten
DOI: 10.26083/tuprints-00017631

Sanctions restrict cross-border interactions and therefore, not only put political and economic pressure on the target country, but also adversely affect the sender country. This paper examines the effect of financial sanctions on the country imposing them. We analyze the business responses of German non-financial entities to the imposition of sanctions on 23 countries over the period from 1999 through 2014. Examining highly disaggregated, monthly data from the German balance of payments statistics, we find four main results. First, German financial activities with sanctioned countries are reduced after the imposition of sanctions. Second, firms doing business with sanctioned countries tend to be disproportionately large, often having alternative business opportunities. Third, firms affected by sanctions expand their activities with non-sanctioned countries, some of which display close trade ties to the sanctioned country. Fourth, we find no effect of sanctions on broader measures of firm performance such as employment or total sales. Overall, we conclude that the economic costs of financial sanctions to the sender country are limited.

Status: Publisher's Version
URN: urn:nbn:de:tuda-tuprints-176312
Additional Information:

JEL Code: F20; F36; F38; F51

Classification DDC: 300 Social sciences > 330 Economics
Divisions: 01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete
01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete > International Economics
Date Deposited: 12 Mar 2021 09:08
Last Modified: 12 Nov 2021 08:27
URI: https://tuprints.ulb.tu-darmstadt.de/id/eprint/17631
PPN: 477775241
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