Firm-Level Geopolitical Risk and Bank Debt Financing: Global Evidence

Erdinc Akyildirim, Gonul Colak, Giray Gozgor and Thang Ho

No 12624, CESifo Working Paper Series from CESifo

Abstract: This paper constructs a novel firm-level measure of geopolitical risk using textual analysis of 130,061 earnings conference call transcripts and examines its impact on firms' reliance on bank-based financing. Using a panel of 4,692 listed firms across 38 countries over 2005–2024, we find that higher firm-level geopolitical risk is associated with a significant increase in the bank debt ratio. Instrument-level analysis shows that this effect is driven by greater reliance on term loans, while revolving credit facilities exhibit no systematic response. The relationship holds across United States and non-United States firms, as well as across developed and emerging economies, with stronger effects in emerging markets and in institutional environments that facilitate contracting and enforcement. A comprehensive set of robustness tests confirms that the results are not driven by industry composition, regional concentration, crisis periods, or omitted institutional factors. Difference-in-differences evidence around the Russia–Ukraine war provides additional support, showing that firms with higher pre-war geopolitical risk increase their reliance on bank debt after 2022. Overall, the findings identify geopolitical risk as a time-varying determinant of corporate financing decisions.

Keywords: geopolitical risk; bank debt; term loans; capital structure; institutional environment; difference-in-differences (search for similar items in EconPapers)
JEL-codes: F34 G21 G32 (search for similar items in EconPapers)
Date: 2026
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