By exploiting variation in nationalities of foreign victims in local terror attacks, we identify distortionary effects of terrorism on country image, trade relations and corporate sales to foreign countries. Effects of terrorism are economically and statistically significant, persistent, and more pronounced after attacks with casualties and high levels of foreign media coverage. 'Guilty-by-association' firms, i.e., local country firms whose names resemble names from their countries of origin, are particularly affected through greater deteriorations in foreign segment sales. Distortions driven by terrorist activities also influence overall firm value, asset growth, and profitability. 

JEL codes: G30, F50, M38, L14, L82.​