Geopolitical Risk and Investment
By Xinjie Wang, Yangru Wu, Weike Xu. Journal of Money, Credit and Banking, 2019
186 citations recorded by the source corpus.
Using a news‐based index of geopolitical risk (GPR), we document a strong negative relationship between firm‐level corporate investment and GPR. When the GPR index doubles, next‐quarter investment declines by 14% of its sample mean. The effect is more pronounced for firms with more irreversible investment or higher market power, confirming the real options theory. However, the effect is less significant for firms with a stronger ability to substitute labor for capital, a higher labor‐to‐capital ratio, or a higher labor share, supporting the convex return theory. Overall, our results suggest that the real options channel dominates the Oi–Hartman–Abel effect.
Subfields: Economics and Econometrics, General Energy
View Paper: https://www.semanticscholar.org/paper/bb8d4f4e0ae66eb400a728335eb1d9bdd09d7772
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In Economics and Econometrics
- Munir Ahmad
- Q. Syed
- Hooi Hooi Lean
- Andrew Adewale Alola
- Muhammad Khalid Anser
- Muhammad Shahbaz
- Ilhan Ozturk
- Sakiru Adebola Solarin
Citations in the corpus
- Do Economic Policy Uncertainty and Geopolitical Risk Lead to Environmental Degradation? Evidence from Emerging Economies (2021, background): “For instance, a several studies highlight that GPR effects economic growth and tourism [14], energy consumption [15], financial markets [16], and research and development [17,18].”