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Firm-Level Geopolitical Risk and Bank Debt Financing: Global Evidence

Author

Listed:
  • Erdinc Akyildirim
  • Gonul Colak
  • Giray Gozgor
  • Thang Ho

Abstract

This paper constructs a novel firm-level measure of geopolitical risk using textual analysis of 130,061 earnings conference call transcripts and examines its impact on firms' reliance on bank-based financing. Using a panel of 4,692 listed firms across 38 countries over 2005–2024, we find that higher firm-level geopolitical risk is associated with a significant increase in the bank debt ratio. Instrument-level analysis shows that this effect is driven by greater reliance on term loans, while revolving credit facilities exhibit no systematic response. The relationship holds across United States and non-United States firms, as well as across developed and emerging economies, with stronger effects in emerging markets and in institutional environments that facilitate contracting and enforcement. A comprehensive set of robustness tests confirms that the results are not driven by industry composition, regional concentration, crisis periods, or omitted institutional factors. Difference-in-differences evidence around the Russia–Ukraine war provides additional support, showing that firms with higher pre-war geopolitical risk increase their reliance on bank debt after 2022. Overall, the findings identify geopolitical risk as a time-varying determinant of corporate financing decisions.

Suggested Citation

  • Erdinc Akyildirim & Gonul Colak & Giray Gozgor & Thang Ho, 2026. "Firm-Level Geopolitical Risk and Bank Debt Financing: Global Evidence," CESifo Working Paper Series 12624, CESifo.
    • Handle: RePEc:ces:ceswps:_12624
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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