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Geoeconomic fragmentation and firms' financial performance

Author

Listed:
  • Alessandro D'Orazio

    (Sapienza University of Rome, European Central Bank)

  • Fabrizio Ferriani

    (Bank of Italy)

  • Andrea Gazzani

    (Bank of Italy)

Abstract

We introduce a novel firm-level revenue-weighted geopolitical risk index by integrating corporate revenue distribution with geopolitical risk across countries. Our findings reveal a significant real-financial feedback loop: firms with greater exposure to geopolitical risk have an increased probability of default, reduced market valuations and higher financing costs. Notably, the impact of this feedback loop has intensified since 2017, aligning with growing apprehension regarding economic fragmentation in firms' risk assessments.

Suggested Citation

  • Alessandro D'Orazio & Fabrizio Ferriani & Andrea Gazzani, 2024. "Geoeconomic fragmentation and firms' financial performance," Questioni di Economia e Finanza (Occasional Papers) 844, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_844_24
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    References listed on IDEAS

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    Cited by:

    1. Shekhar Aiyar & Franziska Ohnsorge, 2024. "Geoeconomic Fragmentation and "Connector" Countries," CAMA Working Papers 2024-53, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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    Keywords

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    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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