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- Title
Security Threats and Investment: North Korean Threats and the South Korean Stock Market.
- Authors
Son, Byunghwan; Moon, Chungshik
- Abstract
Do external security threats shy away from foreign investors? While classical political economy theories focusing on property rights protection posit that security threats undercut financial inflows, recent empirical studies report rather mixed evidence. We add to this body of research by investigating the effect of North Korean military provocation on financial inflows in South Korean stock markets. We contend that (i) foreign investors favor conservative over liberal governments, and (ii) investors have learned over time that North Korean threats lead to electoral gains for the conservative party. Our time series analysis of the monthly Korean stock market data in the post‐liberalization period (2000–2018) reveals that North Korean threats led to increases in capital inflows if these threats were made under liberal governments or in the period before parliamentary elections.
- Subjects
NORTH Korea; ELECTIONS; STOCK exchanges; TIME series analysis; CAPITAL movements; PROPERTY rights
- Publication
Pacific Focus, 2021, Vol 36, Issue 3, p544
- ISSN
1225-4657
- Publication type
Article
- DOI
10.1111/pafo.12198