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Understanding multi-layered sanctions: a firm-level analysis

Shamsi, Javad (2023) Understanding multi-layered sanctions: a firm-level analysis. CEP Discussion Papers (CEPDP1956). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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This paper examines which types of firms are hit by multi-layered sanctions, quantifies the extent of the economic impact on the affected firms, and identifies the channels through which these effects are propagated. To this end, I use a text-based approach from computational linguistics to gauge the exposure of publicly listed Iranian firms to sanctions, validating this measure through its anticipated fluctuation over time and across industries. The findings reveal three key insights. First, Iranian firms report significant challenges due to sanctions, exceeding COVID-19 concerns by up to 20%. Second, politically-connected and non-connected firms suffer equally from sanctions; for every $1 loss inflicted on connected firms, an externality of $5 is imposed on non-connected firms, considering their economic scale. This contradicts the idea that sanctions only inflict harm on political decision-makers. Third, sanctions are hurtful; firms with higher exposure to sanctions endure greater losses in stock market value in the wake of unanticipated sanction events. Sanctions also lead to reduced sales, investment and hiring. Furthermore, the study reveals that sanctions impact firms via several mechanisms, the primary one being the limitation of access to export destinations.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2023 The Author(s)
Divisions: Economics
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HF Commerce
JEL classification: E - Macroeconomics and Monetary Economics > E0 - General
E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook
F - International Economics > F0 - General
G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H32 - Firm
F - International Economics > F5 - International Relations and International Political Economy > F51 - International Conflicts; Negotiations; Sanctions
F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade
Date Deposited: 14 Nov 2023 16:24
Last Modified: 16 Jan 2024 15:15

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