political risk analysis firms
225441085
Host Country Political Risk and Chinese Firms' Cross border M&A Performance
This paper uses 341 cross border M&A activities by 214 Chinese listed companies during 2006 to 2016 to study the connections between host countries' political risk index and the growth value of total factor productivity (TFP) before and after the M&A. Through principal component analysis and random effect panel data regression, the results show the host country's political investment environment and internal political conflicts have significant influence on M&A performance enhancement. At the enterprise level, the results of this paper can provide a theoretical basis for future Chinese companies to implement cross border mergers and acquisitions, and improve both M&A success rate and performance. We believe our research also provide guidance for the government to formulate foreign investment policies and optimize resource allocation.
Haiyue Liu Qiao Guo Yufang Bai Fei Wang
199351686
Global Value Chains, Political Risk, and Firms' Investment Decision in Vietnam: A Firm Level Analysis
Yong kyun Kim
158330543
The building blocks of political risk research: a bibliometric co citation analysis
Purpose The purpose of this paper is to summarise the core literature on political risk and to suggest avenues for future research. Design/methodology/approach Applying bibliometric analysis as a starting point, this systematic review identifies the current core body of literature on political risk and uncovers the theoretical building blocks of the research field. Findings A synthesis of the key literature reveals three broad analytical foci: the sources of political risk; the effects of political risk; and actors' (countries, industries, firms and projects) vulnerabilities, capabilities and responses to political risk. Research limitations/implications The authors propose a unifying conceptual framework for political risk research. Practical implications The paper provides managers with a tool kit to analyse political risk. Moreover, it aids policy makers in addressing political risk in a comprehensive manner. Originality/value The paper represents the first systematic review of the political risk literature in over 30 years. By offering an integrated theoretical framework, it paves the way for new insights into an increasingly topical field.
Alfredo Jimenez Torbjorn Bjorvatn
158190581
Political risk and the equity trading costs of cross listed firms
In order to increase investor participation in capital markets and, consequently, minimize the total cost of trading, it is important to identify which political and social attributes most significantly impact trading and adverse selection costs. We examine the effect of the components of the political risk rating compiled by International Country Risk Guide on the equity trading costs of non U.S. stocks listed on the NYSE in 2011. While the results show a significant effect of political and social attributes on trading costs, they also indicate that this effect is generally not significant on adverse selection costs in periods of extreme price movements. Our analysis allows investors to make a more informed assessment of political risks associated with democratic stability, economic development, government effectiveness, civic cohesiveness and international integration.
Marcus V Braga-Alves
153049121
Political Risk Analysis of U.S. Firms: A Theoretical Framework and an Empirical Analysis
This paper review the literature on political risk analysis by classifying them into different research streams. Also, an empirical analysis of political risk analysis practices of U.S. firms conducted through a questionnaire survey. The survey indicated the increasing importance of this function in firms involved in international trade. Future research directions are also suggested. INTRODUCTION Concomitant with markets becoming global is the realization among businesses of the need to assess the risks of doing business in a particular country. This concept of "political" or "country" risk analysis gained increased importance especially after the advent of the Khomeini regime in Iran. It was estimated that, following the fall of the Shah of Iran, U.S. businesses lost approximately a billion dollars in expropriated assets (Kennedy, 1985) Businesses realized the necessity of continually assessing the risks of doing business in foreign countries. The objective of this paper is to examine the current practices used to assess the political risks of doing business abroad. Specifically, the paper seeks to assess the importance attributed to he political risk analysis function in U.S. organizations, the techniques used in the analysis, and the variables that are assessed. The paper is organized into four sections. The first section reviews the literature on political risk analysis. This is done to provide a frame of reference for the current study. The second section discuses the methodology used in the study, while the next section presents the study results. Finally, the implications of the study's findings (both for managerial practice as well as for theory building in this area) are discussed in section four. REVIEW OF LITERATURE The large amount of research done in the area of political risk analysis can be conveniently grouped into four research streams. Table 1 breaks down the extant research under the four streams.(Table 1 omitted) The first stream deals with the definition of political risk and certain conceptual issues dealing with the measurement of risk. The second stream covers the entire gamut of normative studies done mainly by practitioners. These studies deal with the importance of political risk, both to the overall organization as well as to individual functional areas of the organization. The third research stream is concerned with developing conceptual models for assessing political risk. The fourth stream, which can be considered to be the culmination of all research in this area, deals with the assessment of current practices in political risk analysis by companies both in the U.S. as well as in other parts of the world. Figure 1 portrays the interrelationships among the four streams of research.(Figure 1 omitted) RESEARCH STREAM #1: DEFINITION OF POLITICAL RISK Sethi and Luther (1986) argue that research on political risk analysis is hampered severely because of a lack of consensus on the definition of the term This feeling is also echoed by Fitzpatrick (1983) who is of the opinion that a variety of definitions has lead to an uncoordinated, and often disjointed, evolution of the body of knowledge in this area. Robock (1971) emphasized the differences between "macro risk" and "micro risk." While the former occurs when "unanticipated and politically motivated actions" (Rice and Mahmoud, 1990: 89) of the host government are directed at all foreign enterprises, "micro risk" affects only certain enterprises. Finally, Kobrin (1979, 1984) is of the opinion that the definition of political risk often determines the choice of variables that are studied by a firm. RESEARCH STREAM #2: NORMATIVE ISSUES This stream of research focuses on those studies that describe the importance of political risk analysis, as well as provide normative suggestions for institutionalizing risk analysis in an organization. Normative suggestions for risk analysis include: the need to use objective measures of risk to complement subjective methods currently in use (Blanden, 1988) the importance of comprehensive, all inclusive risk models (Taylor, 1991) the need for a proactive, rather than a reactive approach to risk analysis (Weiner, 1992) the importance of political risk factors in international marketing (Friedman and Kim, 1988) factors that must be considered in selecting a risk consultant (Belcsak, 1997) and the need for accuracy in country forecasts (Merrill, 1982; Simon, 1982; Haner, 1987)
R R Subramanian Jaideep Motwani Samir T Ishak
225138834
The impact of political connection and risk committee on corporate financial performance: evidence from financial firms in Malaysia
This study aims to examine the association between the effectiveness of risk committee (RC) and firms' performance in Malaysian context. It also explores whether political connection has an impact on the relationship.,This study, using a principle components analysis, derives a factor score for RC attributes to proxy the effectiveness of RC. It also uses both accounting and market performance to measure the company performance.,Using a sample of financial firms from 2004 to 2018, this study finds that both accounting and market performance are higher for firms with an effective RC. It also finds that the effectiveness of RC in monitoring and management of risks is more pronounced for politically connected firms (PCFs) In further tests, the paper finds that RC attributes (i.e. RC independence, qualification and gender) are positively and significantly associated with accounting performance, while those of RC existence and overlap are positively and significantly related to market performance. The study also finds that RC size (RC diligence) has a positive (negative) impact on financial firms accounting and market performance. The further analysis also shows that PCFs with a separate as well as larger RCs experience both higher accounting and market performance. This study's results are robust for concerns of endogeneity.,The findings of this study resolve the ongoing debates surrounding political connection by suggesting financial firms not to have politically connected board members as doing so may deteriorate their performance. This study's results are also useful for investors, regulators and policymakers.,To the best of the authors' knowledge, this study, for the first time, introduces on the interaction term between the effectiveness of RCs and political connection to empirically explore how an effective RC may reduce the potential risk of political ties. As such, this study adds to the literature and sheds light on an aspect of risk (i.e. risk stems from establishing close link with the government) that is growing in importance.
Redhwan Ahmed Al-dhamari Mohamad Naimi Mohamad Nor Mourad Boudiab Abdulsalam Mas'ud
225876981
The effect of political risk on shareholder value and the mitigating role of corporate social responsibility (CSR)
The study investigates the effect of political risk on shareholder value, using an event study and a novel measure of firm level political risk recently developed by Hassan et al. (2017) In addition, the authors explore how corporate social responsibility (CSR) influences the effect of political risk on shareholder wealth.,The authors exploit the guilty plea of Jack Abramoff, a well known lobbyist, on January 3, 2006, as an exogenous shock that made lobbying less effective and less useful in the future, depriving firms of an important tool to reduce political exposure.,The results show that the market reactions are significantly more negative for firms with more political exposure. Additional analysis corroborates the results, including propensity score matching, instrumental variable analysis and Oster's (2019) method for testing coefficient stability. Finally, the authors note that the adverse effect of political risk on shareholder value is substantially mitigated for firms with strong social responsibility, consistent with the risk mitigation hypothesis.,This study is the first to explore the effect of political risk on shareholder value using a novel measure. Furthermore, it is also the first to show that CSR alleviates the cost of political risk to shareholders.
Pattanaporn Chatjuthamard P Jiraporn Pattarake Sarajoti Manohar Singh
168375344
A Study of how Organisational Culture and Experience Affect Firms' Political Risk Identification: A Case Study of Ericsson, Motorola Solutions, Tecnotree and KVH Industries
The end of the Cold War marked the end of a dual world power system and an opening up of world markets. This has resulted in a more complex risk landscape, complicating political risks that firms face abroad. The 1990s and onwards also marked an increase in global interconnectedness, increasing companies' exposure to political risks. Political risk identification has therefore become important component to incorporate into overall risk assessments when operating abroad. This paper argues that a company's exposure to political risk is dependent on temporal aspects and the type of sector it is operating in. By isolating these aspects, this paper assesses how organisational culture and experience affect how four telecommunication firms Ericsson, Motorola Solutions, Tecnotree and KVH identify political risk. The overall purpose of this paper is therefore to assess how organisational culture and experience affect political risk identification. A framework for analysis is developed from existing literature specifying various sub variables within organisational culture and experience. The thesis finds that organisational culture affects political risk identification. However, this effect differs depending on the type of organisational culture. Scandinavian organisational cultures make firms better equipped at identifying emerging political risks whilst American organisational cultures make firms more capable at identifying current political risks. The thesis also finds that experience affects political risk identification with mature firms with experiential market specific knowledge being more proficient at identifying political risk. Finally, analysis finds a link between organisational culture and experience and their effect on political risk identification. It finds that the ability to incorporate experiences is dependent on organisational culture with Scandinavian organisational cultures making firms better at incorporating learned experiences to improve political risk identification. Keywords: political risk, organisational culture, experience, political risk identification, risk management, Ericsson, Motorola, Tecnotree, KVH Industries (Less)
Alexander D'Alessandro Peshko Mohtadi
158564072
Managing political risk in the oil and gas industry in a developing economy: the case of BP in Angola
Drawing on a case research methodology, this paper analyses political risk for oil firms in the Republic of Angola. The dramatic fall in oil prices, coupled with the existing social inequalities, have substantially increased the risk of political instability, macroeconomic instability, regulatory changes and social dissent. These factors are exacerbated by the actions and, in some cases, inaction of the government and other political players. By focusing on a specific case firm, BP, we analyse the organisational processes used by this European firm to manage political risk in Angola and compare it with an existing framework for political risk management. We conducted semi structured interviews with political risk management professionals within the firm and a review of corporate documents provided by the firm to ensure the qualitative analysis achieves more consistent results. Despite having a political risk management culture embedded in their strategies and plans, our findings show that political risk management is not completely developed yet.
Adalberto Fernandes Alfredo Jimenez Johannes M Kraak Dimitrios Tsagdis
211121230
Charismatic Rhetoric Modeling in Conference Call on Firm Political Risk Management
Measuring and modeling rhetoric in the context of financial disclosures becomes essential as its important role in the becoming of present society and the increasing influence of corporations on economic management. We adapt rhetoric model rules from computational linguistics to construct a new measure of rhetoric (alliteration and rhyme) faced by earnings conference call of individual US firms and calculate rhetorical sentences ratio in the conference call transcript data to measure the rhetoric. We find rhetoric has a significant relationship with firm level political risk and sentiment in the quarter of earnings conference call, which means managers' speech rhetoric will directly influence firm performance by its political risk. Our finding demonstrates the value of the rhetorical analysis by its empirical analysis in business disclosures and sheds light on future speech textual analysis research directions on firm management.
2019 International Conference on Economic Management and Model Engineering (ICEMME)
Mingqin Yu Lei La