Conflict and Capital: Global Financial Responses to State-Sponsored Violence in Africa

Karida BrownChris Yenkey earned his PhD in Sociology from Cornell University in 2011. His research combines multi-disciplinary theories of misconduct, social capital, and distrust to better understand market development in sub-Saharan Africa. Prof. Yenkey’s earlier work investigated the effects of tribalism on the recruitment of investors into Kenya’s nascent financial market. Currently, his research focuses on the causes and effects of fraud and political violence on markets across Africa, particularly through documenting and explaining the lack of expected negative reactions to these forms of corruption. His research appears in Administrative Science QuarterlyAmerican Journal of Sociology, and Social Forces and has received several awards, most recently the 2017 Granovetter Award for Best Paper in Economic Sociology. Yenkey is currently Assistant Professor of International Business at the Univ. of South Carolina’s Darla Moore School of Business. He was previously on the faculty of the Univ. of Chicago Booth School of Business from 2011-2016.


ABSTRACT:

This paper seeks to document and explain the changes, or more importantly the lackof changes, in global financial flows into African countries following state-caused deaths arising from political violence. My larger goal is a better understanding of whether markets reward better governance or whether misconduct leads actors who demand better governance standards to self-select out of a market. If it is the latter, then each misconduct event paradoxically makes the next event more rather than less likely because the market becomes increasingly populated by actors who are undeterred by misconduct, suggesting an endogenous process through which corruption becomes institutionalized. I explore this outcome by estimating monthly bilateral financial flows between African and non-African countries following state-caused deaths in all African countries. Specifically, I estimate which types of bilateral relationships result in positive, negative, or no changes in bilateral financial flows following state-caused deaths, with bilateral relationships determined by trade, aid, and cultural or geographic proximity measures. The analysis is made possible with access to monthly data on the value and volume of bilateral financial transfers provided by the Society for Worldwide Interbank Financial Transfers (SWIFT).