A Novel Measure of Political Risk and Foreign Direct Investment Inflows

Pavel Jeutang and Kwabena Kesse
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Pavel Jeutang: College of Business Administration, University of Nebraska at Omaha, Omaha, NE 68182, USA
Kwabena Kesse: The Business School, University of Colorado Denver, Denver, CO 80204, USA

JRFM, 2021, vol. 14, issue 10, 1-23

Abstract: This paper proposes a novel measure of political risk that confirms some of the findings documented in the Foreign Direct Investments (FDI) literature. Particularly, we confirm the positive relationship between political stability and its components on FDI inflows, and the moderating effect of natural resources on this relationship. The proposed political risk measure contains relevant, unique and incremental information not observed in the literature. For example, although this measure is highly correlated with the political risk rating of the International Country Risk Guide (ICRG), it contains unique information that explains FDI inflows beyond what is explained by the ICRG rating. A link to the database for our political risk rating for 150 countries covering 2000 to 2015 has been provided.

Keywords: foreign direct investments; political risk; country risk; natural resources (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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