The Impact of Financial Sanctions: The Case of Iran 2011–2016

39 Pages Posted: 27 Jan 2020

See all articles by Saeed Ghasseminejad

Saeed Ghasseminejad

City University of NY, Baruch College, Zicklin School of Business

Mohammad R. Jahan-Parvar

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: December 24, 2019

Abstract

This study provides a detailed analysis of the impact of financial sanctions on publicly traded companies. We consider the effect of imposing and lifting sanctions on the target country's publicly traded firms and examine the differences in the reaction of politically connected firms and those without such connections. The paper focuses on Iran due to (1) its sizable financial markets, (2) imposition of sanctions of varying severity and duration on private and state-owned companies, (3) the significant presence of politically connected firms in the stock market, and (4) the unique event of the 2015 nuclear deal, resulting in fairly rapid lifting of a sizable portion of imposed sanctions. We find that sanctions affect politically connected firms more than ordinary firms, have lasting negative effects on profitability ratios, and that politically connected firms’ stock prices bounce back more slowly after removal of sanctions. Firms targeted by financial sanctions decrease their leverage and increase their cash holding to manage their perceived increase in risk profile.

Keywords: Financial Sanctions; Capital Structure; Event Study; Political Connections; Iran; National Security

JEL Classification: D74, H56, F51, G32, G39.

Suggested Citation

Ghasseminejad, Saeed and Jahan-Parvar, Mohammad R., The Impact of Financial Sanctions: The Case of Iran 2011–2016 (December 24, 2019). Available at SSRN: https://ssrn.com/abstract=3509017 or http://dx.doi.org/10.2139/ssrn.3509017

Saeed Ghasseminejad

City University of NY, Baruch College, Zicklin School of Business ( email )

One Bernard Baruch Way
New York, NY 10010
United States

Mohammad R. Jahan-Parvar (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://sites.google.com/site/mrjahan/

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