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Previous research shows that domestic unrest, and especially violent conflict, raises political risk and discourages foreign direct investment (FDI). However, prior work primarily has studied private Western multinational corporations, not authoritarian China, the second largest overseas investor, which has both state-owned enterprises (SOEs) and privately-owned enterprises (POEs). This paper investigates the effects of domestic conflict on overseas Chinese FDI. We first compare Chinese SOE and POE investments in host states facing political unrest. Next, we disaggregate political unrest, examining the effect of violent and non-violent campaigns on Chinese SOEs and POEs. We then disaggregate the sector of FDI inflows. Contrary to prior conflict studies, we find host states under political unrest, and specifically violent campaigns, attract Chinese SOEs no matter the economic sector, whereas POEs are more risk averse. Our findings show that Chinese SOEs favor higher risk investments, suggesting the need for theoretical nuance in the domestic conflict and FDI literature. [ABSTRACT FROM AUTHOR]

Macro stress testing has become an increasingly important part of central banks' and macroprudential authorities' toolkits in the wake of the Global Financial Crisis. One of the most important parts of the stress testing framework is the estimation of credit risk losses under adverse circumstances. However, standard satellite models based on econometrics of time series may not be well suited to estimate credit risk losses for countries with short time series, incomplete credit cycle or structural breaks, as in the case of Slovakia. Incorporating micro data into the stress testing framework becomes important for such countries. In this paper, we show that using micro data leads to more plausible results compared to time series in form of higher estimated share of nonperforming loans. For the estimations, we use a unique set of individual retail loan data collected from banks operating in Slovakia. As the Slovak banking sector did not face a rapid worsening of the credit quality of retail loans during the Global Financial Crisis, the recent Covid-19 pandemic in 2020 is the only reference period of increased economic and financial tensions. This period also confirms our approach, as using micro data leads to nonperforming loan ratios that are closer to the ratio of indebted households asking for loan payment deferral during the pandemic. [ABSTRACT FROM AUTHOR]

Commodity-exporting economies display procyclicality with the price of commodity exports. However, the evidence for the relative importance of commodity price shocks for aggregate fluctuations remains inconclusive. Using Russian data from 2001 to 2018 we estimate a small open economy New Keynesian model with a banking system and leveraged domestic firms who default on their unsecured domestic debt. We show that allowing default rates to vary endogenously over the business cycle amplifies the estimated contribution of commodity price shocks. Endogenous default introduces time-varying wedges that amplify the response of commodity price shocks through demand and income effects rather than the relative price effects that are found in the country risk-premium, balance sheet, and financial accelerator channels. We find that the contribution of commodity prices to explaining fluctuations in GDP rises from 2.5 to 33.6% while for deposits and non-performing loans, it increases from 5.3% and 1.6% to 71.3% and 60.4%, respectively. [ABSTRACT FROM AUTHOR]

The decarbonization of the shipping industry is a critical imperative in the global fight against climate change. Non-EU countries, being significant contributors to shipping emissions, play a crucial role in shaping the industry's sustainable future. However, securing funding for shipping decarbonization initiatives in these countries presents challenges, such as limited access to capital, lack of financial initiatives, political and regulatory uncertainties, technological risks, lack of local expertise, and the effects of global economic volatility. Addressing these challenges demands innovative strategies. The paper explores ways of effectively allocating funds for decarbonization projects in the shipping industry of non-EU countries, Türkiye in particular, using a structured decision-making framework tailored to their specific needs and challenges. We adopt the Moment Integrated Solution Method (THEMIS) to identify the "best" option from the range of alternative strategies identified in the framework. Our findings show that the use of incentive mechanisms is the most prioritized funding alternative, followed by the implementation of a sound Cap-and-Trade system and the promotion of strict local regulations to combat emissions. These imply that the prioritization of funding mechanisms, market-driven approaches, and more stringent regulation are key drivers in maritime decarbonization efforts. The Türkiye case study on strategies to achieve a greener maritime industry in developing countries also shows that securing funding for decarbonization requires a concerted effort by governments, private entities, and international organizations. [ABSTRACT FROM AUTHOR]

Given the significant oil price changes during the past two decades, this paper examines the effect of oil price uncertainty on the sovereign credit risk of four Gulf Cooperation Council (GCC) countries (United Arab Emirates, Qatar, Bahrain, and Saudi Arabia). By utilizing the nonparametric local linear dummy variable estimates (LLDVE), we unveil a significant effect of oil uncertainty on the credit risk mainly during the oil price crash of 2014–2015 and to a lesser extent during the early period of the COVID-19 pandemic. This effect, however, is heterogeneous across the GCC countries. Unlike previous studies, our study controls for structural shifts, nonlinearities, and long-term trends in the relationship between oil price uncertainty and credit risk. Our findings hold important policy implications for policymakers and investors. [ABSTRACT FROM AUTHOR]

We examine whether a country leader's diplomatic visit to the USA affects the Foreign Direct Investment inflow. The literature so far has found inconclusive results regarding diplomatic relations' effect on international flows. We use a dynamic Inverse Probability Weighting Regression Adjustment framework to examine this relationship and estimate the causal effect of foreign visits. Our results indicate that a visit to the US increases the country's total FDI inflows by up to one percentage point per annum, with a cumulative effect reaching 2.5 percentage points six years after the visit. However, this is a short-run effect as it disappears in the subsequent years. Furthermore, our first-stage results shed light on the profile of the leaders that visit the US. Our findings are consistent with the view that foreign visits act as signals to investors regarding the country's political risk. [ABSTRACT FROM AUTHOR]

This study evaluates the impact of macroeconomic shocks, financial market volatility, and regulatory and political risks on financial inclusion among developing economies. Data spanning the period from 2001 to 2020 were compiled from a sample of 39 Sub-Saharan Africa (SSA) economies for the analysis. Data analysis was performed using the panel-corrected standard error (PCSE) estimation technique by Beck and Katz (1995). The analysis suggests that macroeconomic risk, financial market volatility, and regulatory uncertainty constrain financial inclusion among reviewed economies. Further results suggest that effective governance or improved governance structures may not be enough to alleviate the adverse effects of macroeconomic risk, financial market volatility, and regulatory uncertainty on financial inclusion. The moderating impact of political instability on the nexus between macroeconomic risk and financial inclusion further highlights the inimical influence of both macroeconomic and political risks on financial inclusion. The various conclusions have significant implications for policymakers; they admonish the need for measures that ensure macroeconomic stability, promote financial market stability, and support unambiguous regulatory policies to foster financial inclusion. [ABSTRACT FROM AUTHOR]

This study aims to fill the gap in the literature by specifically investigating the impact of country risk on the credit risk of the banking sectors operating in Brazil, Russia, India, China, and South Africa (BRICS), emerging countries. More specifically, we explore whether the country-specific risks, namely financial, economic, and political risks significantly impact the BRICS banking sectors' non-performing loans and also probe which risk has the most outstanding effect on credit risk. To do so, we perform panel data analysis using the quantile estimation approach covering the period 2004–2020. The empirical results reveal that the country risk significantly leads to increasing the banking sector's credit risk and this effect is prominent in the banking sector of countries with a higher degree of non-performing loans (Q.25 = − 0.105, Q.50 = − 0.131, Q.75 = − 0.153, Q.95 = − 0.175). Furthermore, the results underscore that an emerging country's political, economic, and financial instabilities are strongly associated with increasing the banking sector's credit risk and a rise in political risk in particular has the most positive prominent impact on the banking sector of countries with a higher degree of non-performing loans (Q.25 = − 0.122, Q.50 = − 0.141, Q.75 = − 0.163, Q.95 = − 0.172). Moreover, the results suggest that, in addition to the banking sector-specific determinants, credit risk is significantly impacted by the financial market development, lending interest rate, and global risk. The results are robust and have significant policy suggestions for many policymakers, bank executives, researchers, and analysts. [ABSTRACT FROM AUTHOR]

This study aims to investigate the extent to which institutional quality influences risk allocation in energy infrastructure public–private partnerships (PPPs) projects in Africa. The analysis covers 396 energy infrastructure PPP projects in 35 African countries over the period 1990–2019 based on the World Bank Private Participation in Infrastructure database and the Worldwide Governance Indicators. Risk is measured through contract classification and relates to the increasing participation of the private sector in more structured forms of PPPs, that is, the private sector supports higher risks as it participates in more structured forms of PPPs. For that purpose, four types of PPPs contracts are considered: management and leases, brownfields, greenfields, and divestitures. The results show that control of corruption, sound government effectiveness, political stability and absence of violence, and strong rule of law significantly and positively influence the risk allocation between the private and public sectors toward the private entity. Conversely, regulatory quality and voice and accountability do not significantly affect risk allocation between the two parties. The estimated effects are much stronger in countries with greater experience in energy infrastructure PPPs projects, suggesting that in addition to institutional quality, private investors are more likely to be interested in taking more risks in energy PPPs projects in experienced countries. While distinguishing between African low-income and middle-income countries, the findings suggest that with the same level of institutional quality, there is a high probability that more risks are allocated to the private sector in middle-income countries compared to low-income countries. Policy recommendations are presented and discussed accordingly. [ABSTRACT FROM AUTHOR]

Xu & Ma (2023) develops an intelligent option portfolio model that allows selling options contracts to earn option fees and considers the high leverage of options in the market. Fintech Ho (2023) probes the influence of innovation spillovers in the artificial intelligence (AI) and financial technology (Fin-tech) industries on the value of the internet of things (IoT) companies. Amirteimoori et al. (2023) introduces a stochastic cost-efficiency model to develop a value-based measure of the scale elasticity of firms facing data uncertainty. [Extracted from the article]

This study investigates whether firm-level political risk increases managers' propensity to avoid taxes. Using a measure of firm-level political risk developed by Hassan et al. (Quart J Econom 134(4):2135–2202, 2019) and several commonly used measures of tax avoidance, we find that corporate tax avoidance increases with firm-level political risk and that the main results hold in various supplemental and endogeneity tests. In cross-sectional tests, we document that the positive relationship between firm-level political risk and tax avoidance is stronger for lower levels of tax avoidance, and is weaker when firms have superior cash flow performance and higher cash holdings. In addition, we show that the positive relationship between firm-level political risk and tax avoidance is stronger during the Trump administration's trade policy changes as well as during the global financial crisis. [ABSTRACT FROM AUTHOR]

Sustainable financial development plays a vital role in new institutional economics and transaction cost economics. This asserts the important role of interest and exchange rates and political stability as determinants of an economy's institutional quality. The current study aimed to investigate the effects of the real interest rate, the exchange rate and political stability on foreign direct investment (FDI) inflows in G7 and Gulf Cooperation Council (GCC) countries from 2005 to 2019. The panel fully modified least square and panel dynamic least square estimators used in this study revealed a significant positive long-run relationship between the real interest rate and FDI inflows in the G7 and GCC countries. In addition, there was a significant negative long-run relationship between the exchange rate and FDI inflows in the G7 countries; this relationship was insignificant in the GCC countries. There was also a significant negative long-run relationship between political stability and FDI inflows in the GCC countries; this relationship was insignificant in the G7 countries. The panel least square method confirmed the results of the previous two estimators for the real interest rate and FDI inflows in the G7 countries. Based on these findings, to increase FDI inflows, efforts should be made to lower the lending interest rate and enhance capital formation and trade. Furthermore, market forces should be allowed to determine the real interest rate, and monetary policy should focus on developing a systematic exchange rate to promote political stability and the sustainability of foreign investment in developed and developing countries. [ABSTRACT FROM AUTHOR]

We investigate whether firm-level political risk affects corporate cash holdings. Taking a sample of 5424 US firms with 129,750 firm-quarter observations from 2002Q1 to 2021Q3, we find that cash holdings is higher for firms with greater exposure to firm-level political risk. The positive relationship between firm political risk and cash holdings is consistent for financial constraint and non-constraint firms, high and low growth firms, pro-cyclical and counter-cyclical and competitive industries. Further, our findings are consistent to alternative measures of firm-level political risk and cash holdings. In addition, our findings remain robust with different endogeneity tests: a natural experiment, an instrumental variable approach, and a propensity score matching. Overall, we present novel evidence on the determinants of corporate cash holdings. [ABSTRACT FROM AUTHOR]

Copyright of Journal of International Business Studies is the property of Springer Nature and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper proposes a new approach for tackling the issue of the impact of sovereign rating on corporate ratings. As the policy of never rating a private issuer above its government (sovereign ceiling) has been relaxed by the major credit rating agencies, further empirical investigation is needed to identify the key factors that determine the strength of sovereign-corporate nexus. We suggest implementing a nonlinear panel smooth transition regression modelling where the sovereign effect is allowed to vary across different firm-level financial states. Our results reveal that financially healthier corporations in terms of interest and debt coverage ratios are found to be less dependent on their home country credit risk. Our empirical findings have important implications for credit market participants and offer a call for a better understanding of the role of firm-specific financial characteristics in the rating decisions. [ABSTRACT FROM AUTHOR]

This paper built a system containing the Distributed Crawling Module, the Database Module and the Analysis Module to collect a large number of objective data, clean the data and realize the business intelligence representation. The distributed crawling system includes the Distributed Crawling Module building from Hadoop, the Database Module by SQL Server and the Analysis Module by the SAS system. The first two modules support a distributed way to collect and convert non-structural data into structural data for the last module processing. Then, this paper extends research fields from theory to application about B&R, constructs rating system from the perspective of political risk, economic risk, financial risk, business environment risk and legal risk, establishes a 140 rating index, collects 46,200 sample data, and adopts Model of Principal Components Analysis, Analytic Hierarchy Process and Efficacy Function to access "the Belt & Road Initiative" 66 countries for 5 consecutive years of export credit insurance in the country risk rating. This paper also gives a detail explanation on 2015 rating results, showing that, Singapore wins the highest credit rating among the country; the credit rating of Latvia, Estonia, Slovakia, Turkey, Malaysia, Russia, Thailand and other countries is very high; Afghanistan, Ukraine, Laos, Iran, Arabia, Republic of Syria, Iraq, Burma, Republic of Yemen, East Timor and other countries with poor credit ratings. The conclusion is consistent with the domestic and overseas well-known rating agencies. [ABSTRACT FROM AUTHOR]

Background: There is currently an inadequate supply of allografts to meet the number of transplant candidates worldwide. A number of controversial policies, including implementation of a presumed consent organ donation system, have been considered to rectify the organ donation crisis.Aims: A secondary retrospective data analysis aimed to assess the impact of switching to a presumed consent organ donation model on organ donation rates.Methods: Deceased organ donation rates were compared before and after countries adopted presumed consent.Results: Six countries met entry criteria. All six countries had an increase in liver donation rates, while 4 out of the six countries had an increase in kidney donation rates. The overall mean (± SD) liver donation rate was 3.23 (± 0.97) per million population (pmp) before the transition and 6.46 (± 1.81) pmp after the transition (p < 0.0001). The overall mean (± SD) kidney donation rate was 17.94 (± 3.34) pmp before the transition and 26.58 (± 4.23) pmp after the transition (p < 0.0001). The percentage increase in liver and kidney donation rates varied among countries, ranging from 28 to 1186%.Conclusion: The transition from explicit to presumed consent was associated with a significant increase in liver donation rates in all countries that met our criteria, while the effect on kidney donation rates was partially realized. Although presumed consent alone is unlikely to explain the increase in donation rates, the adoption of such a policy may prove to be a worthwhile risk for countries experiencing consistently low organ donation rates. [ABSTRACT FROM AUTHOR]

Understanding political risk and its effect on financial markets is an important issue for both policymakers and investors, as capital flow tends to be confidence-based across financial markets. Using both dollar-based monthly returns from the BIST100 index and the total political risk rating, including four political risk subcomponents, for the period of January 1997 to June 2013, this paper investigates the long-term relationship between financial markets and political risk in Turkey applying cointegration tests and causality tests to data obtained from Borsa Istanbul (BIST) and the International Country Risk Guide (ICRG). Our findings indicate that, a long-term relationship of equilibrium exists between financial markets and political risks in Turkey, revealing the importance of considering political conditions when making decisions regarding financial markets in Turkey. The research is expected to contribute to the literature, especially in the context of trading in emerging financial markets and how political acts reflect financial markets, as shown by the evidence from Turkey. [ABSTRACT FROM AUTHOR]

Our study explores an under-examined way in which the Chinese government supports outward foreign direct investment (OFDI): state supported development loans to host countries. Through such loans, the Chinese government develops commercial and diplomatic relationships with host countries, which in turn facilitate Chinese firms’ access to natural resources while at the same time limiting their exposure to host country political risk. We provide evidence in Latin America that although Chinese OFDI occurs in countries where government-related political risk is high, Chinese firms are less likely to be involved in public disputes with the host government. However, they are more likely to engage in conflicts with nongovernment stakeholders. Thus, while the Chinese government may assist in obtaining a political or legal license to operate, Chinese firms appear to have more difficulty obtaining a social license to operate, suggesting that the Chinese model has limits, notably with respect to mitigating social risks. [ABSTRACT FROM AUTHOR]

The concept of political risk has been defined from the perspective of developed-country multinational enterprises (MNEs) and has mainly focused on the political and regulatory perils in developing host countries. However, we have limited understanding of how emerging market firms perceive political risk in international marketplaces. Adopting a case study method, we examine how Chinese MNEs perceive political risk when operating in developed and developing host countries, specifically, the European Union (EU) and Africa. Our findings show that Chinese MNEs regard their home-country origin and industry-specific restrictions as major political risks in the EU. By contrast, they consider the volatile political environment in some African countries as the main source of political risk. In addition to the sharp contrast in the political and regulatory environment between the EU and African states, Chinese MNEs commonly encounter political risks in both markets due to their own behaviour. [ABSTRACT FROM AUTHOR]

This paper investigates the influence of country risks, including economic, financial, and political risks, on income inequality for a broad sample of 110 countries. Our empirical results reveal that higher economic and political risks generally lead to higher inequality. Lower income country appears to have higher income inequality. Furthermore, with the consideration of the non-monotonic effect of country risk, the improvement of income distribution is only sustainable dynamically after a certain threshold level of country risk has been brought down. Policymakers should improve the level of country stability by exploring the benefits of country risk reduction in order to improve income distribution. [ABSTRACT FROM AUTHOR]

Previous studies have suggested that (1) a type of organizational capabilities-namely, political capabilities-are required for multinational corporations (MNCs) to grow in global markets, (2) political capabilities are important for building productive relations with governments in politically risky host countries, and (3) MNCs can develop political capabilities by accumulating foreign experiences. However, empirical studies have found both positive and negative effects of such experiences on global market expansions. This study attributes such mixed findings to our lack of understanding about MNCs' procurement processes of political capabilities and proposes types of experiences critical for such procurements by focusing on their reactions to political changes in host countries. Using data on the global mining industry and political changes in host countries, we find that MNCs develop political capabilities and thus make entries into politically risky host countries when they accumulate the experience of partially divesting some of their assets after political changes in host countries. We also find that MNCs are less likely to enter such countries if they have more experiences of exiting from host countries following political change. [ABSTRACT FROM AUTHOR]

Copyright of Journal of International Business Studies is the property of Springer Nature and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Journal of International Business Studies is the property of Springer Nature and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Although theory suggests its importance, empirical evidence on the relation between exogenous termination risk and contracted compensation packages is limited. This study takes a different approach by exploring determinants of contracted annual compensation and severance packages for city managers. Results indicate that managers exposed to greater exogenous political risk- i.e., those employed by municipalities where voters are more likely to recall elected officials-are 6 %-11 % more likely to receive severance, and receive, on average, 12 %-24 % more severance pay, but do not receive more annual compensation. Additional analyses suggest that the relation between contracted municipal severance and political risk primarily exists in states without restrictions on voters' ability to file recalls and in municipalities with strong public sector unions. Findings also suggest that municipalities with greater expected agency problems between managers and citizens offer significantly more contracted annual compensation and severance pay. [ABSTRACT FROM AUTHOR]

This paper evaluates the performance of East Asian banks during the period of 2000-2010 by controlling country-specific conditions comprehensively. Particularly, it seeks to show that country-specific conditions are significant factors in estimating the common frontier by which the performance of all banks are compared. Thus, disregarding political conditions, regulatory environments, and country risk would lead to inaccurate efficiency scores because of the inaccurate common frontier. Following this further, an inaccurate measure of bank performance can hardly reveal bank problems before turning into a crisis. Our results confirm the significant impact of country-specific conditions on the common frontier, and hence bank efficiencies. The findings suggest that researchers, bank managers, and regulators also consider other factors other than economic conditions in their evaluations and decisions. [ABSTRACT FROM AUTHOR]

This study investigates the determinants of capital structure decisions by real estate firms, with a specific focus on the impact of political risk on leverage. Using a sample of Asia-Pacific REITs and listed property trusts, we find those firms with properties located in countries characterized by relatively high degrees of political risk, such as political instability, and/or greater uncertainty in the ability to repatriate and monetize profits from international investment activities, employ less debt than their counterparts operating in more politically stable environments. This core finding remains robust to alternative sample selection criteria including the division of the sample into high versus low market-to-book value firms, and also holds within the subset of organizations that are active in raising additional capital in the secondary markets. [ABSTRACT FROM AUTHOR]

Using the before-after natural experiment occasioned by the Arab Spring in Libya, we explore how market and non-market activity affect foreign firm legitimacy in times of political turmoil. Although all MNEs in Libya had to cultivate strong ties to Qadhafi to succeed during his 40 years of rule, we found that those that also invested in social-benefit projects and in social ties with families with few ties to the Qadhafi family earned a broad-based legitimacy that helped them survive Qadhafi's overthrow. Our findings contribute to the political risk and political behavior literature the notion that the pursuit of firm legitimacy in general, and especially in the eyes of social-sector actors, is an effective hedge against political risk. More theoretically, our findings support the addition of a social-sector-based path to firm legitimacy in the host country that complements and may at times substitute for, the government-based path to foreign firm legitimacy. Practically, our findings suggest that MNEs' facing severe political risk can improve their prospects for survival by investing in relationships with influential social groups and by offering goods or services that are perceived as socially valuable. [ABSTRACT FROM AUTHOR]

Our study draws on arguments advanced in behavioral decision theory to examine the effects of managerial equity ownership and compensation structures on establishment mode choice (the choice between greenfield start-ups and cross-border acquisitions). It is based on a sample of 396 establishment mode choice decisions comprising of 291 cross-border acquisitions and 105 greenfield start-ups by non-diversified US manufacturing firms. Findings indicate that both managerial equity ownership and the proportion of contingent pay in key managers' compensation structures are associated with the preference for cross-border acquisitions over greenfield ventures. Our analysis also indicates that there is a greater propensity on the part of managers with significant equity ownership to select acquisitions when entry involves host countries characterized by high political risk. [ABSTRACT FROM AUTHOR]

This paper seeks to investigate the bilateral impact of two components of global diversification: political risk and product diversification relatedness. By analyzing a sample of 119 Spanish firms we find empirical evidence that having experience in risky environments is a useful resource for multinational enterprises. The results obtained show that experience managing high levels of political risk in the foreign direct investment (FDI) portfolio increases the number of countries where the firm may potentially invest. This multinational flexibility encourages a higher degree of product diversification relatedness by facilitating the achievement of economies of scope in the activities carried out in foreign markets. By contrast, the degree of relatedness in product diversification did not show any significant impact on political risk, due to the existence of instruments available to cover or minimize this risk when investing abroad. [ABSTRACT FROM AUTHOR]

In this paper, we examine the co-evolution of learning and internationalization strategy in international new ventures (INVs). Many researchers have suggested that in contrast to the reliance on experiential learning by firms that internationalize incrementally, firms that internationalize rapidly use alternatives such as congenital and vicarious learning. However, few empirical studies explicitly examine how the use of learning processes in INVs evolves. We used retrospective longitudinal analysis to explore the learning processes of four New Zealand-based INVs, and found that their dominant learning mode and foci of learning changed as internationalization increased. Around the time of founding, congenital learning dominated, but as the firms began to internationalize, they relied more on experiential, vicarious, searching and noticing learning processes. The focus of their learning also shifted from product knowledge to knowledge about foreign markets and the internationalization process. In the later stages of their internationalization, experiential learning increased in importance, as did other resource-intensive learning processes such as grafting by hiring locals or acquiring foreign companies. We conclude that the learning processes used by INVs co-evolve with their internationalization, and are more rapid and less systematic than is implied by traditional models of the internationalization process, with substitutes for experiential learning dominating early in the process. [ABSTRACT FROM AUTHOR]

We examine the impact of political risk on firms' payout policy. Using a large international sample across 35 countries over the period from 1990 to 2008, we find that global political crises raise the market perceived uncertainty and cost of external financing. Using crisis events as a proxy for political risk, we document that past dividend payers are more likely to terminate dividends and that non-payers are less likely to initiate dividends during periods of high political risk. These findings suggest a precautionary incentive of managers in response to political shocks. Further analysis shows that the effect of political risk on payout policy is stronger for multinational corporations, but can be attenuated by country-specific institutional settings, such as more stable political systems and stronger investor legal protection. [ABSTRACT FROM AUTHOR]

We introduce a new, market-based and forward-looking measure of political risk derived from the yield spread between a country's US dollar debt and an equivalent US Treasury bond. We explain the variation in these sovereign spreads with four factors: global economic conditions, country-specific economic factors, liquidity of the country's bond, and political risk. We then extract the part of the sovereign spread that is due to political risk, making use of political risk ratings. In addition, we provide new evidence that these political risk ratings are predictive, on average, of future risk realizations using data on political risk claims as well as a novel textual-based database of risk realizations. Our political risk spread measure does not make the mistake of double counting systematic risk in the evaluation of international investments, as some conventional measures do. Furthermore, we show how to construct political risk spreads for countries that do not have sovereign bond data. Finally, we link our political risk spreads to foreign direct investment (FDI). We show that a 1% point reduction in the political risk spreads is associated with a 12% increase in net-inflows of FDI. [ABSTRACT FROM AUTHOR]

The size of the Fed's balance sheet has almost quadrupled since 2007, and the composition of the balance sheet has changed in important ways, with regard to both assets and liabilities. This short paper asseses the implications for how monetary policy works, and the entailed risks. The size of the balance sheet and its composition may not matter economically, but there are significant political risks. The political risk-taking may make monetary policy choices more difficult than they would otherwise be. [ABSTRACT FROM AUTHOR]

We examine the role of geographic, economic, and institutional factors in attracting Foreign Direct Investment (FDI) in Europe, using a cross-section of inward bilateral investments. We estimate and assess the expected benefits, the required reform efforts, and the efficiency of reform options corresponding to a convergence of Portuguese institutions to EU standards. We conclude that improving home institutions is likely to have a quantitatively very significant role in attracting FDI. Geographical and market size factors also play a role. Reforms promoting the independence of financial institutions and a leaner bureaucracy, lowering political risk and corruption, and improving the investment code may significantly affect the amount of bilateral inward FDI that is targeted to Portugal. [ABSTRACT FROM AUTHOR]

The internationalization of Chinese enterprises is a subject that is receiving increasing attention in international business research. This paper analyzes the influence of political risk and cultural distance on the location patterns of large Chinese companies. Our results show some characteristics that differ from the conventional wisdom. A high political risk in the host country does not discourage Chinese multinationals. However, from a more conventional point of view, the presence of overseas Chinese in the host country is positively associated with Chinese outward foreign direct investment (FDI). In addition, firm size and the volume of Chinese exports to the host country have a positive influence. [ABSTRACT FROM AUTHOR]

The central objective of this paper is to develop a transparent, consistent, self-contained, and stable country risk rating model, closely approximating the country risk ratings provided by Standard and Poor's (S&P). The model should be non-recursive, i.e., it should not rely on the previous years' S&P ratings. The set of variables selected here includes not only economic-financial but also political variables. We propose a new model based on the novel combinatorial-logical technique of Logical Analysis of Data (which derives a new rating system only from the qualitative information representing pairwise comparisons of country riskiness). We also develop a method allowing to derive a rating system that has any desired level of granularity. The accuracy of the proposed model's predictions, measured by its correlation coefficients with the S&P ratings, and confirmed by k-folding cross-validation, exceeds 95%. The stability of the constructed non-recursive model is shown in three ways: by the correlation of the predictions with those of other agencies (Moody's and The Institutional Investor), by predicting 1999 ratings using the non-recursive model derived from the 1998 dataset applied to the 1999 data, and by successfully predicting the ratings of several previously non-rated countries. This study provides new insights on the importance of variables by supporting the necessity of including in the analysis, in addition to economic variables, also political variables (in particular 'political stability'), and by identifying 'financial depth and efficiency' as a new critical factor in assessing country risk. [ABSTRACT FROM AUTHOR]

This paper investigates the importance of market institutions for the performance of international property investors during the 1996-2007 period. The results show that international property companies underperform local property companies in the early years of the sample period. This underperformance is driven by the political environment, the level of economic integration, and the transparency of the real estate market in target countries. The underperformance of internationals disappears in the later years of the sample period, and so does the significance of the aforementioned factors in explaining performance differences among international companies. These findings suggest that the increased transparency of the global real estate industry has leveled the playing field for foreign property investors. [ABSTRACT FROM AUTHOR]

• The theory of internalization suggests that proprietary assets--usually in the form of advertising and/or marketing capabilities--are the key to understanding a firm's ability to create value in foreign markets. We show that the capacity of a multinational corporation (MNC) to create value in a foreign direct investment (FDI) can also result from the use of an alternative proprietary asset; that is, the skills and management expertise that are acquired through the accumulation of various forms of foreign experience. • The value creation comes from the extension of an MNC's experience-based capabilities to the host country to mitigate country-level risks. this experience can moderate the negative influence of environmental risk to create value for a firm and its investors. • In our sample of 305 FDIs, we find that Japanese MNCs that had direct or indirect experience in a host country showed greater abnormal returns in a FDI, particularly where environmental risk was high. [ABSTRACT FROM AUTHOR]

This paper investigates the effect of resource nationalism on the value of petroleum (crude oil and natural gas) reserves. We develop a framework for treating resource nationalism as political risk, and utilize data on reserve transactions (from John S. Herold) and political risk ratings (from International Country Risk Guide and Institutional Investor) for the period 2000-2006. Controlling for other factors that affect reserve value, we demonstrate the value destruction of political risk, and estimate the political risk discount for 37 countries. The paper contributes to both the international business literature and practitioner approaches to political risk analysis in demonstrating use of publicly available market data from real-asset transactions to measure the cost of political risk. We also show that the discount depends on market conditions: the higher expected future petroleum prices are, the larger is the discount at any level of political risk. This insight adds a new dimension to analysis of political risk, which is typically measured and examined without regard to market conditions. [ABSTRACT FROM AUTHOR]

Although multinationals operate under cross-border jurisdictions, the relevance of interstate security relations to international business has received little attention. Despite the impressive accumulation of knowledge in international business and international relations, the two intellectual communities have largely ignored the insights from each other. In this article, we seek to bridge this gap. We argue that interstate military conflict and security alliances, as two central features of interstate security relations, often change both government policies toward international business and investor expectations of political risk. From the perspectives of both states and investors, military conflict should reduce bilateral investment whereas security alliances increase it. Our empirical analysis applies the system GMM estimator to a gravity model of bilateral investment flows for 1117 directed dyads among 58 countries from 1980 to 2000. Among 18 countries whose per capita real incomes remain consistently above 12,000 constant dollars, the security factors do not affect bilateral investment; in the high-income/low-income dyads, interstate military conflict and security alliances significantly influence bilateral investment as expected. The findings depict two separate realms in which international politics does and does not interfere with international business, helping us improve political risk assessments and understand the interactions between states and firms. [ABSTRACT FROM AUTHOR]

An introduction to the topics discussed within the special issue is presented, giving particular focus on the relationship between economic exchange and political conflict in the context of international business.

In countries with secure property rights, corporate transparency improves investment efficiency and increases growth by alleviating information asymmetry. However, in countries with insecure property rights, greater transparency can increase the risk of government expropriation. Therefore some firms that would benefit most from transparency cannot take full advantage of it, as they set sub-optimal transparency levels. Using data from 59 industries in 69 countries, we find that in countries with weak property rights protection, industries that would benefit the most from transparency exhibit worse investment efficiency and grow more slowly than industries that can efficiently operate at minimal levels of transparency. [ABSTRACT FROM AUTHOR]

We investigate the effect of the political regime on bilateral FDI flows from advanced to emerging countries in the period 1992–2004. We control for country size, per capita income and privatization proceeds in the host country, and use a random-effect Tobit model to exploit information from zero entries. Our results suggest that democracy does have a positive effect on the amount and probability of FDI flows from developed to emerging countries. Moreover, we find that the effect of democracy on FDI also works through the total factor productivity channel, not only the political risk one as suggested in the literature. [ABSTRACT FROM AUTHOR]

This paper examines the impact of political risk in Canada on the volatility of stock returns. Our results suggest that political news associated with the possible separation of Quebec from Canada plays an important role in the volatility of stock returns. However, our evidence indicates that investors do not require a risk premium, supporting the idea that political risk is diversifiable. We also show that stock return volatility varies with the degree of a firm's exposure to political risk, namely, the structure of assets and the extent of foreign involvement, which indicates that firms most exposed to political risk bear the burden of diversification. [ABSTRACT FROM AUTHOR]

In this paper, we develop a model using a conditional Poisson process for measuring the effect of a countable number of mutually dependant political risks on the outcome of foreign direct investment. We also apply a Bayesian updating process that makes it possible to re-estimate the model's parameters as new information becomes available. We then show how the model can be operationalized and provide a comparative example related to foreign direct investment. [ABSTRACT FROM AUTHOR]

In this paper the models for the real exchange rate determination are re-examined between Japan and five East-Asian countries. Two important findings are reported. First, the real interest rate-bias model is valid for Korea-, Malaysia-, Indonesia-, and Philippines-Japan, and the productivitybias model is valid for Indonesia-, and Philippines-Japan: that is, the coefficients of relative variables are stable and statistically significant. Second, there is no evidence that the political risk premium model is valid. [ABSTRACT FROM AUTHOR]

This study examines the determinants of foreign equity ownership in joint ventures in China. Drawing upon Dunning's ownership, locational and internalization paradigm and the literature on bargaining power, eleven variables that impact foreign ownership preferences and concessions are examined. These variables are advertising intensity, foreign capital input, country risk of China, EJV investment amount, EJV contractual duration, cultural distance, competitive intensity, local partner state ownership, local partner alignment, foreign partner alignment, and EJV location. The empirical findings are largely consistent with the hypotheses. Further, interesting differences were found among U.S., European and Japanese firms with respect to the impact of these determinants. [ABSTRACT FROM AUTHOR]

This paper examines the benefits of portfolio investment in the stock markets of politically risky countries by evaluating the effects of political risk constraints on the performance of a portfolio of international stocks. We use monthly data on political risk ratings and stock returns for a sample of thirty-six countries from April 1982 to December 1991, Ex-post and ex-ante portfolio selection strategies are developed to assess the gains from international diversification. Efficient sets are derived using a quadratic programming technique. We use four ex-ante portfolio strategies whose optimal portfolio weights are those of the equally weighted portfolio, the minimum-variance portfolio, the certainty-equivalence tangency portfolio and the Bayes-Stein portfolio. The empirical findings, based on the performance tests of Jobson and Korkie [1981], suggest that diversification among politically risky countries improves the risk-return characteristics of optimal portfolios. However, the most striking benefit of the inclusion of politically risky countries in an international portfolio is the reduction in overall portfolio risk. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to replicate Euromoneys and Institutional Investor's country risk ratings on the basis of economic and political variables. The evidence reveals that country risk ratings respond to some of the variables suggested by the theory. In particular, both the level of per capita income and propensity to invest affect positively the rating of a country. In addition, high-ranking countries are less indebted than low-ranking countries. It also appears that the ability of the model to duplicate the two country risk measures is very similar and both magazines' ratings can be replicated to a significant degree with few available economic statistics. [ABSTRACT FROM AUTHOR]