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Country Risk Within CEE Area: Empirical Perspective on Corporate Cost of Equity

Author

Listed:
  • Petre Brezeanu

    (Academy of Economic Studies, Bucharest, Romania)

  • Lucian Ionescu

    (Romanian Banking Institute, Romania)

  • Cristina Maria Triandafil

    (Academy of Economic Studies, Bucharest, Romania)

Abstract

This paper studies corporate exposure to country risk from the perspective of the cost of equity. Indeed, corporations located into emerging countries are perceived as being riskier; therefore, investors require higher returns which increase the financing costs. Under these circumstances, financial managers face the challenge of quite a tough balance to keep up with: valorising the growth potential offered by the emerging countries on the condition of implementing powerful financial strategies, capable of protecting the corporation from the macroeconomic volatility. This research develops a practical approach on the way exposure to country risk impacts company’s financial balance, with a deep keen on the operational support offered by various methodologies that analysts get use of within the assessment process.

Suggested Citation

  • Petre Brezeanu & Lucian Ionescu & Cristina Maria Triandafil, 2009. "Country Risk Within CEE Area: Empirical Perspective on Corporate Cost of Equity," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 9(3), pages 81-86.
  • Handle: RePEc:pet:annals:v:9:i:3:y:2009:p:81-86
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    File URL: http://upet.ro/annals/economics/pdf/2009/20090307.pdf
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    References listed on IDEAS

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    1. Mikkelson, Wayne H., 1981. "Convertible calls and security returns," Journal of Financial Economics, Elsevier, vol. 9(3), pages 237-264, September.
    2. Stephen Godfrey & Ramon Espinosa, 1996. "A Practical Approach To Calculating Costs Of Equity For Investments In Emerging Markets," Journal of Applied Corporate Finance, Morgan Stanley, vol. 9(3), pages 80-90.
    3. David M Reeb & Chuck C Y Kwok & H Young Baek, 1998. "Systematic Risk of the Multinational Corporation," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(2), pages 263-279, June.
    4. Allen Michel & Israel Shaked, 1986. "Multinational Corporations vs Domestic Corporations: Financial Performance and Characteristics," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 17(3), pages 89-100, September.
    5. Clark, Ephraim, 1997. "Valuing political risk," Journal of International Money and Finance, Elsevier, vol. 16(3), pages 477-490, June.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Gabriela Corina Slusariuc & Ilie Răscolean & Anca Jarmila Guță, 2011. "Sovereign Risk Assessment under Economic Crisis Conditions," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 11(1), pages 245-252.

    More about this item

    Keywords

    country risk; corporate; exposure; equity; financing;

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