Political risk and international valuation

Foreign Infrastructure Investment in Developing Countries: A Dynamic Panel Data Model of Political Risk Impacts

“…As inferred from Table 1, previous studies e.g. (Henisz, 2000;Doh & Ramamurti, 2003;Kesternich & Schnitzer, 2010;Kyaw et al, 2011;Méon & Sekkat, 2012;Jiménez et al, 2014a;Bekaert et al, 2016), have established that political risk greatly affects FDI and infrastructure investment. Nevertheless, research into the relationship between political risk and FDI on infrastructure investment (FDII) in developing countries, remains limited (Banaitienė et al, 2015;Keeley & Ikeda, 2017).…”

“…Among the risks, political risk plays a key role with regards to decisions on international expansion, foreign investment, the market value of multinationals, and ownership of multinational firms in host countries (Kesternich & Schnitzer, 2010;Zavadskas, Turskis, & Tamošaitiene, 2010;Kyaw, Manley, & Shetty, 2011;Méon & Sekkat, 2012;Jiménez, Ongena, Peydró, & Saurina, 2014b). Political risk are political events in a country that impact the business climate in such a way as to rupture reasonably expected returns, namely: political changes that influence future cash flows (Howell, 2011;Bekaert, Harvey, Lundblad, & Siegel, 2016). The problem of political risks is particularly acute in developing countries (Bekaert et al, 2016;Fernando et al, 2017;Hosseini et al, 2018;Ramamurti & Doh, 2004).…”

“…Political risk are political events in a country that impact the business climate in such a way as to rupture reasonably expected returns, namely: political changes that influence future cash flows (Howell, 2011;Bekaert, Harvey, Lundblad, & Siegel, 2016). The problem of political risks is particularly acute in developing countries (Bekaert et al, 2016;Fernando et al, 2017;Hosseini et al, 2018;Ramamurti & Doh, 2004). Unstable political environments mean that foreign investors must risk extra expenditure on foreign infrastructure investment while receiving reduced returns as a consequence of rent seeking, expropriation, increased tax and so on (Spiller & Savedoff, 1999;Zavadskas, Ustinovichius, & Stasiulionis, 2004).…”

“…Given the infrastructure shortfall in developing counties (Ghoddousi & Hosseini, 2012), FDI has become essential to infrastructure projects (World Economic Forum, 2017a). However, infrastructure investment is usually thought of as high-risk, and the extra-dimension of cross-border investment amplifies the concerns (Henisz, 2000;Bekaert et al, 2016). Moreover, FDII in developing countries, with uncertain longer-term regulatory constraints on the one hand, and dynamic policy regimes on the other, further compound the risks (Finkenzeller et al, 2010).…”

“…On the basis of previous studies, political risk is anticipated to have negative effects on FDI and FDII (Henisz, 2000;Doh & Ramamurti, 2003;Kesternich & Schnitzer, 2010;Méon & Sekkat, 2012;Jiménez et al, 2014a;Bekaert et al, 2016). However, FDI and FDII are not only affected by political risk, but also impacted by other macro factors (Espinosa-Ramírez, Kayalica, & Kumaû, 2015).…”