Firm-level political risk and asymmetric volatility

Aye, Goodness C.; Balcılar, Mehmet; Demirer, Rıza; Gupta, Rangan

doi:10.1016/j.jeca.2018.e00110

Cited by 21 publications

(7 citation statements)

References 47 publications

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“…Similarly, Boutchkova et al (2012) associate economic and political uncertainty with decrease in firm efficiency. In another related study, Aye et al (2018) document that economic uncertainty increases the stock return volatility 1 . Given the negative impact of economic uncertainty on firm performance/valuation, it is important to see what mechanisms can dampen its consequences for firms.…”

Section: Introductionmentioning

confidence: 98%

Economic policy uncertainty nexus with the value relevance of advertising: Evidence from an emerging market

2023

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This paper aims to document the effect of economic policy uncertainty on the value of advertising expenditures within the context of an emerging market. The paper shows that the value of advertising expenditures is an increasing function of economic policy uncertainty. The impact of advertising on firm performance is more pronounced during the periods characterized by higher economic policy uncertainty. We argue that, during uncertain times, the financial information loses its relevance. Therefore, during these periods, non‐financial traits, such as brand image, customer equity, relationship capital, and familiarity that characterizes firms with high advertising become more important. The findings hold in various sub‐samples and across various proxies of advertising activity. The findings also hold under alternate estimation procedures (pooled OLS regression, panel data with fixed effects and instrument variable regression). More importantly, this paper also shows that, relative to other agency reducing mechanisms (such as analyst coverage, asset utilization ratio, expense ratio and dividend payments), advertising is more valuable during periods with high economic policy uncertainty.

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Section: Introductionmentioning

confidence: 98%

Economic policy uncertainty nexus with the value relevance of advertising: Evidence from an emerging market

2023

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“…Political risk is a broad term, including but not limited to uncertainty regarding political resolutions, political conditions and other political events in a country or region that may threaten a company's operation or overall performance, financial assets or investment returns (Henisz & Zelner, 2010). At a firm level, political risk affects a firm's strategic decisions and performance in several ways: stock return volatility (Aye et al., 2018), corporate investment (Choi et al., 2021) and corporate social responsibility (Chatjuthamard et al., 2021). This study concentrates on EPR to provide firms interested in managing such risk with an evidence base that discerns the effects of various mitigation strategies on stakeholder wealth.…”

Section: Introductionmentioning

confidence: 99%

Environment‐specific political risk mitigation: Political lobbying versus green innovation

Rahman

Sinnewe

Chapple

et al. 2023

Business Fin & Account

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Greater political pressure to improve corporate environmental performance and mitigate climate change impact leads firms to operate under greater political risk and uncertainty, affecting productivity and firm value. Using a panel of 3255 US firms from 2002 to 2020, this research tests the effectiveness of two environment‐specific political risk (EPR) mitigation approaches: political lobbying and green innovation. The results suggest that while both approaches mitigate EPR of the current year, only green innovation reduces future EPR. By mitigating EPR, green innovation increases firm value to a greater degree than political lobbying. This study also shows that political lobbying has a larger effect on EPR mitigation for the leaders than the laggards in green innovation. The results are robust to alternative specifications of green innovation, political lobbying and potential endogeneity concerns. Overall, this study supports the value‐enhancing role of green innovation as an effective political risk mitigation strategy.

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“…It is important for investors to have a solid understanding of stocks and stock price movements. This can be accomplished through careful pre-investment analysis and careful consideration of the hazards that can result from varying stock price movements (Amini et al, 2020;Aye et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

Revealing the Structure of Financial Performance on Stock Prices

Mubarok

2022

j. Organisasi dan manaj.

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Purpose – Businesses are required to be able to present evidence of successful financial performance. The purpose of this research is to examine the relationship between specific financial ratios and the stock market performance of corporations in the infrastructure, utility, and transportation sectors. Methodology – This study employs panel data regression with quarterly reports from 6 companies from 2015 to 2020. Variables such as stock prices, total asset turnover, the debt to equity ratio, the return on assets, the price to book value, the size of the firm, and the current ratio are analyzed. Findings – Total asset turnover was found to have little effect on stock prices compared to other metrics such as the current ratio, firm size, price to book value, return on assets, and debt to equity ratio. It is imperative that businesses pay attention to the ratio indicators that persistently impact stock prices. Large swings in financial ratios are associated with an increased risk as well as a decline in public trust. Originality – This study extends the scope of previous research by extending the fundamental factors that are not only centered on liquidity, solvency, and profitability, but also with new variations, specifically the ratio of total asset turnover and price to book value. Additionally, this study adds new information to the fundamental factors that are not only centered on liquidity, solvency, and profitability.

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Firm-level political risk and asymmetric volatility

Cited by 21 publications

References 47 publications

Economic policy uncertainty nexus with the value relevance of advertising: Evidence from an emerging market

Economic policy uncertainty nexus with the value relevance of advertising: Evidence from an emerging market

Environment‐specific political risk mitigation: Political lobbying versus green innovation

Revealing the Structure of Financial Performance on Stock Prices

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