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Geopolitical Risk and Profit Margin: A Quantitative Study of IBM

Author

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  • Maanav Vinay Kejriwal

Abstract

Purpose: This research paper explores the impact of geopolitical risk (measured via Geopolitical Risk Index) on IBM's profitability, specifically focusing on profit margins from Fiscal Year (FY) 2009 to FY 2023. Design/Methodology/Approach: Utilizing quantitative methodologies, including correlation and regression analyses, the study identifies a significant negative relationship between the Geopolitical Risk Index (GPRI) and IBM’s profit margins. Findings: The findings reveal that periods of heightened geopolitical tension, such as the Russian invasion of Ukraine and major trade disputes, correspond with substantial declines in profitability. However, variations in the correlation suggest that additional factors, including market strategies and operational efficiencies, also influence profit margins. Practical Implications: This research underscores the importance of geopolitical risk assessment in multinational corporations which is often overlooked and highlights the need for a multifaceted approach to understanding the drivers of financial performance. Originality/Value: The results provide valuable insights for policymakers and business leaders navigating the complexities of a geopolitically volatile environment.

Suggested Citation

  • Maanav Vinay Kejriwal, 2024. "Geopolitical Risk and Profit Margin: A Quantitative Study of IBM," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 14(3), pages 22-30.
    • Handle: RePEc:ers:ijfirm:v:14:y:2024:i:3:p:22-30
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    References listed on IDEAS

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    1. Lubos Pástor & Pietro Veronesi, 2012. "Uncertainty about Government Policy and Stock Prices," Journal of Finance, American Finance Association, vol. 67(4), pages 1219-1264, August.
    2. Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, vol. 82(4), pages 901-921, September.
    3. Dario Caldara & Matteo Iacoviello, 2022. "Measuring Geopolitical Risk," American Economic Review, American Economic Association, vol. 112(4), pages 1194-1225, April.
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    Keywords

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    JEL classification:

    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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