The Limits of Hegemony: Banks, Covert Actions, and Foreign Firms

52 Pages Posted: 27 Oct 2021 Last revised: 26 Apr 2022

See all articles by Felipe Aldunate

Felipe Aldunate

Universidad de los Andes, Chile - ESE Business School

Felipe González

Queen Mary University of London

Mounu Prem

Einaudi Institute for Economics and Finance (EIEF)

Date Written: April 1, 2022

Abstract

Economic sanctions and covert actions from hegemonic states are common tools used to influence other countries. Less is known about non-state actors such as banks and their impact across borders. We use new firm-level data from Chile to document a substantial decrease in financial relations with U.S. banks after socialist Salvador Allende took office in 1970. An analysis of links with banks from other countries reveals that part of the decrease was specific to the U.S. banking sector. Business reports and stock prices suggest that firms were mostly unaffected by the destruction of links with U.S. banks. Substitution of financial relations towards state-owned banks appears to be the key mechanism to explain these findings.

Keywords: firms, banks, Cold War, United States, Richard Nixon, Salvador Allende.

JEL Classification: N2, N4

Suggested Citation

Aldunate, Felipe and González, Felipe and Prem, Mounu, The Limits of Hegemony: Banks, Covert Actions, and Foreign Firms (April 1, 2022). Available at SSRN: https://ssrn.com/abstract=3950664 or http://dx.doi.org/10.2139/ssrn.3950664

Felipe Aldunate

Universidad de los Andes, Chile - ESE Business School ( email )

Av. La Plaza 1905
San Carlos de Apoquindo, Las Condes
Santiago
Chile

Felipe González

Queen Mary University of London ( email )

Mile End Road
London, London E1 4NS
United Kingdom

Mounu Prem (Contact Author)

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

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