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Geopolitical risk and firm value: Evidence from emerging markets

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  • Pringpong, Sasin
  • Maneenop, Sakkakom
  • Jaroenjitrkam, Anutchanat

Abstract

We examine the impact of geopolitical risk (GPR) on firm value, focusing on non-financial firms from 14 emerging market countries. The evidence shows that heightening GPR is associated with reducing firm value. The country-specific idiosyncratic GPR, representing local geopolitical shocks, is the primary driver of the negative impact on firm value, whereas the global systematic GPR is irrelevant. The latter risk, however, has a high effect on firm value during the high GPR period. The idiosyncratic GPR plays a more significant role after the 9/11 terrorist attack and during high geopolitical uncertainty. We also find that firms reduce internal risk by holding more cash and debt during high external uncertainty, decreasing firm value.

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  • Pringpong, Sasin & Maneenop, Sakkakom & Jaroenjitrkam, Anutchanat, 2023. "Geopolitical risk and firm value: Evidence from emerging markets," The North American Journal of Economics and Finance, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:ecofin:v:68:y:2023:i:c:s1062940823000748
    DOI: 10.1016/j.najef.2023.101951
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    2. Hartwell, Christopher A. & Zadorozhna, Olha, 2024. "The connections that bind: Political connectivity in the face of geopolitical disruption," Journal of International Management, Elsevier, vol. 30(3).
    3. Rahat, Birjees & Nguyen, Pascal, 2024. "The impact of ESG profile on Firm's valuation in emerging markets," International Review of Financial Analysis, Elsevier, vol. 95(PA).
    4. Yang, Chien-Wen & Hsieh, Yi-Shan & Hung, Chih-Yuan, 2024. "Economic uncertainty and corporate cash holdings: Evidence from Taiwan," The North American Journal of Economics and Finance, Elsevier, vol. 73(C).
    5. Siddhartha Barman & Jitendra Mahakud, 2025. "Assessing the Impact of Policy Uncertainty, Geopolitical Risk, and Sustainable Disclosure on Corporate Performance," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 32(1), pages 167-203, March.
    6. Carney, Richard W. & El Ghoul, Sadok & Guedhami, Omrane & Wang, He (Helen), 2024. "Geopolitical risk and the cost of capital in emerging economies," Emerging Markets Review, Elsevier, vol. 61(C).
    7. Jin, Shan & Hoang, Khanh & Gan, Christopher & Nguyen, Quang Thi Thieu & Anh, Dao Le Trang, 2025. "Russo-Ukrainian geopolitical tensions: An empirical analysis of corporate investment in Europe," Pacific-Basin Finance Journal, Elsevier, vol. 90(C).
    8. Liu, Jiahao & Zhu, Bo & Hu, Xin, 2024. "Systemic risk spillovers among global energy firms: Does geopolitical risk matter?," Energy Economics, Elsevier, vol. 140(C).
    9. Tse, Ying Kei & Dong, Kyra & Sun, Ruiqing & Mason, Robert, 2024. "Recovering from geopolitical risk: An event study of Huawei's semiconductor supply chain," International Journal of Production Economics, Elsevier, vol. 275(C).
    10. Giang Thi Huong Vuong & Manh Huu Nguyen & Khanh Hoang, 2024. "Oil price uncertainty, oil pricing reform, and corporate profitability: The case of China," PLOS ONE, Public Library of Science, vol. 19(2), pages 1-25, February.
    11. Shovon Sengupta & Tanujit Chakraborty & Sunny Kumar Singh, 2023. "Forecasting CPI inflation under economic policy and geopolitical uncertainties," Papers 2401.00249, arXiv.org, revised Jul 2024.

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    More about this item

    Keywords

    Geopolitical risk; Political uncertainty; Firm value; Emerging markets;
    All these keywords.

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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