#12164. Domestic Terrorism and Sovereign Bond Ratings in the Developing World

July 2026publication date
Proposal available till 25-05-2025
4 total number of authors per manuscript0 $

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Journal’s subject area:
Political Science and International Relations;
Sociology and Political Science;
Safety Research;
Safety, Risk, Reliability and Quality;
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Abstract:
Since the 1990s, credit rating agencies have played a prominent financial role in developing countries rating their sovereign bonds and determining capital costs. Over the same years, domestic terrorism has expanded increasing market disruptions in countries. Using a sample of seventy-one developing countries, we find that domestic terrorist incidents result in sovereign bond downgrades for countries that receive ratings. Further, when we disaggregate terrorist events by target type, we observe that attacks directed at the government, military and police, business, non-governmental organizations, and private citizens/property have a larger effect than other terrorist incidents. We argue that specific domestic terrorist attacks increase economic instability, leading to capital flight, and a shifting of resources from productive economic sectors to counterterrorism. The resulting economic changes weaken a country’s economy and increase debt nonpayment risk.
Keywords:
credit rating agencies; developing countries; disaggregate terrorist events; Domestic terrorism; sovereign bond ratings

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