Social unrest and corporate behaviour during the Arab Spring period

While several facets of social unrest have been well-studied in the literature, one aspect which has remained largely unaddressed is its impact on corporate behaviour. To examine this closely, integrating data on 12 MENA country-firms covering both oil exporters and oil importers during 2001–2015 with a newly constructed measure of social unrest, we exploit the natural experiment of the Arab Spring to tease out the impact of social unrest on firm behaviour. The findings suggest that there is an increase in leverage, driven mainly by an increase in long-term leverage, although at a higher cost. Robustness tests reveal a cyclical pattern in the evolution of such leverage wherein short-term leverage declines and rises thereafter, whereas the reverse holds for long-term leverage. We undertake several robustness tests of the baseline findings and continue to find evidence in favour of a discernible impact of social unrest on corporate behaviour.