Geoeconomic fragmentation and firms' financial performance

Alessandro D'Orazio (), Fabrizio Ferriani and Andrea Giovanni Gazzani
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Alessandro D'Orazio: Sapienza University of Rome, European Central Bank

No 844, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We introduce a novel firm-level revenue-weighted geopolitical risk index by integrating corporate revenue distribution with geopolitical risk across countries. Our findings reveal a significant real-financial feedback loop: firms with greater exposure to geopolitical risk have an increased probability of default, reduced market valuations and higher financing costs. Notably, the impact of this feedback loop has intensified since 2017, aligning with growing apprehension regarding economic fragmentation in firms' risk assessments.

Keywords: geopolitical risk; fragmentation; financial performance; revenue exposure (search for similar items in EconPapers)
JEL-codes: F36 F50 F65 G30 (search for similar items in EconPapers)
Date: 2024-04
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_844_24

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