Geopolitical risk and firm value: Evidence from emerging markets

Sasin Pringpong, Sakkakom Maneenop and Anutchanat Jaroenjitrkam

The North American Journal of Economics and Finance, 2023, vol. 68, issue C

Abstract: We examine the impact of geopolitical risk (GPR) on firm value, focusing on non-financial firms from 14 emerging market countries. The evidence shows that heightening GPR is associated with reducing firm value. The country-specific idiosyncratic GPR, representing local geopolitical shocks, is the primary driver of the negative impact on firm value, whereas the global systematic GPR is irrelevant. The latter risk, however, has a high effect on firm value during the high GPR period. The idiosyncratic GPR plays a more significant role after the 9/11 terrorist attack and during high geopolitical uncertainty. We also find that firms reduce internal risk by holding more cash and debt during high external uncertainty, decreasing firm value.

Keywords: Geopolitical risk; Political uncertainty; Firm value; Emerging markets (search for similar items in EconPapers)
JEL-codes: F51 G15 G30 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:68:y:2023:i:c:s1062940823000748

DOI: 10.1016/j.najef.2023.101951

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