INVESTMENT POLICY, GEOPOLITICAL RISK AND THE ROLE OF INSTITUTIONS: INTERNATIONAL EVIDENCE
In today’s world, given the increasing importance of geopolitical risk (GPR), this study investigates the impact of GPR on corporate investment, or capital expenditure, of nonfinancial firms considering institutional settings. Utilising data on 337,399 firm-years from 42 countries for the period 199...
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| Format: | Article |
| Language: | English |
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Bank Indonesia
2024-09-01
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| Series: | Journal of Central Banking Law and Institutions |
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| Online Access: | https://jcli-bi.org/index.php/jcli/article/view/165 |
| _version_ | 1826583699422969856 |
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| author | Hasan Tekin |
| author_facet | Hasan Tekin |
| author_sort | Hasan Tekin |
| collection | DOAJ |
| description | In today’s world, given the increasing importance of geopolitical risk (GPR), this study investigates the impact of GPR on corporate investment, or capital expenditure, of nonfinancial firms considering institutional settings. Utilising data on 337,399 firm-years from 42 countries for the period 1996-2021 (retrieved from Datastream), empirical findings show that firms in higher GPR countries present fewer investment opportunities. Namely, firms use capital expenditures as a substitute for GPR. Next, the negative impact of governance on capital expenditures across the whole sample remains for the firms in civil law countries. However, it reverts to positive for those in common law countries. In other words, capital expenditures are a substitute for (outcome of) governance in civil (common) law countries.Overall, investors should be concerned about the level of GPR, governance, and legal system when determining where to invest. Policymakers should consider GPR and institutional quality to attract foreign investors. |
| first_indexed | 2025-03-14T15:26:00Z |
| format | Article |
| id | doaj.art-429d3f4621e74bdbb3af56b58928225c |
| institution | Directory Open Access Journal |
| issn | 2827-7775 2809-9885 |
| language | English |
| last_indexed | 2025-03-14T15:26:00Z |
| publishDate | 2024-09-01 |
| publisher | Bank Indonesia |
| record_format | Article |
| series | Journal of Central Banking Law and Institutions |
| spelling | doaj.art-429d3f4621e74bdbb3af56b58928225c2025-02-25T10:25:24ZengBank IndonesiaJournal of Central Banking Law and Institutions2827-77752809-98852024-09-013352354610.21098/jcli.v3i3.165165INVESTMENT POLICY, GEOPOLITICAL RISK AND THE ROLE OF INSTITUTIONS: INTERNATIONAL EVIDENCEHasan Tekin0University in Karabük, TürkiyeIn today’s world, given the increasing importance of geopolitical risk (GPR), this study investigates the impact of GPR on corporate investment, or capital expenditure, of nonfinancial firms considering institutional settings. Utilising data on 337,399 firm-years from 42 countries for the period 1996-2021 (retrieved from Datastream), empirical findings show that firms in higher GPR countries present fewer investment opportunities. Namely, firms use capital expenditures as a substitute for GPR. Next, the negative impact of governance on capital expenditures across the whole sample remains for the firms in civil law countries. However, it reverts to positive for those in common law countries. In other words, capital expenditures are a substitute for (outcome of) governance in civil (common) law countries.Overall, investors should be concerned about the level of GPR, governance, and legal system when determining where to invest. Policymakers should consider GPR and institutional quality to attract foreign investors.https://jcli-bi.org/index.php/jcli/article/view/165geopolitical riskgovernanceinvestmentlegal system |
| spellingShingle | Hasan Tekin INVESTMENT POLICY, GEOPOLITICAL RISK AND THE ROLE OF INSTITUTIONS: INTERNATIONAL EVIDENCE Journal of Central Banking Law and Institutions geopolitical risk governance investment legal system |
| title | INVESTMENT POLICY, GEOPOLITICAL RISK AND THE ROLE OF INSTITUTIONS: INTERNATIONAL EVIDENCE |
| title_full | INVESTMENT POLICY, GEOPOLITICAL RISK AND THE ROLE OF INSTITUTIONS: INTERNATIONAL EVIDENCE |
| title_fullStr | INVESTMENT POLICY, GEOPOLITICAL RISK AND THE ROLE OF INSTITUTIONS: INTERNATIONAL EVIDENCE |
| title_full_unstemmed | INVESTMENT POLICY, GEOPOLITICAL RISK AND THE ROLE OF INSTITUTIONS: INTERNATIONAL EVIDENCE |
| title_short | INVESTMENT POLICY, GEOPOLITICAL RISK AND THE ROLE OF INSTITUTIONS: INTERNATIONAL EVIDENCE |
| title_sort | investment policy geopolitical risk and the role of institutions international evidence |
| topic | geopolitical risk governance investment legal system |
| url | https://jcli-bi.org/index.php/jcli/article/view/165 |
| work_keys_str_mv | AT hasantekin investmentpolicygeopoliticalriskandtheroleofinstitutionsinternationalevidence |