Political risk and the cost of capital in the MENA region

Belkhir, Mohamed; Boubakri, Narjess; Grira, Jocelyn

doi:10.1016/j.ememar.2017.08.002

Cited by 35 publications

(23 citation statements)

References 31 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Despite the initial validation of the negative relationship between political risk and cost of equity, both 2SLS models reveal similar significant coefficients with negative signs of the

{PRISK}_{it}

variable implying that actually firm‐level political risk positively impacts cost of equity. In fact, consistent with literature, investors in stock markets require a premium to compensate them for bearing additional political risk (Pástor and Veronesi, 2013; Belkhir et al ., 2017). Panel B of Table 3 presents pooled OLS results, which are similar to the random effect results.…”

Section: Methodology and Estimationsmentioning

confidence: 99%

Firm‐level political risk and Shari’ah compliance: equity capital cost and payouts policy

Karimov

Balli

et al. 2020

Accounting & Finance

View full text Add to dashboard Cite

Using a novel Economic Policy Uncertainty (EPU) firm‐level political risk index as a measurement for political risk corporations face, we examine the impact of firm‐level political risk on the cost of equity capital (COE) and dividend payouts policy of firms. The paper aims to shed light on adaptation implications of Shari’ah compliance (SC) on firms exposed to firm‐level political risk. We analyse if adoption of Shari’ah compliance requirements (SCR) mitigates firm‐level political risk and impacts the cost of equity and dividend policy. Our benchmark results show that a 1 percent increase in exposure to political risk contributes to a rise in the COE by 0.1 percent and in dividend payout by 5 percent. We find that SC eventually leads to a fall in the COE and in dividend payouts, despite exposure of the firm to political risk. Our findings have important policy implications that are relevant to Shari’ah‐compliant equities and beyond.

show abstract

“…Despite the initial validation of the negative relationship between political risk and cost of equity, both 2SLS models reveal similar significant coefficients with negative signs of the

{PRISK}_{it}

Section: Methodology and Estimationsmentioning

confidence: 99%

Firm‐level political risk and Shari’ah compliance: equity capital cost and payouts policy

Karimov

Balli

et al. 2020

Accounting & Finance

View full text Add to dashboard Cite

show abstract

“…Consistent with expectation, risky banks charge higher rates on loans. Third, to isolate the effect of economic uncertainty from the design and quality of political institutions, which also impact financing costs Belkhir et al (2017), we add variables from ICRG dataset to control for democratic accountability, corruption, and law and order situation. The results of WUI index largely remain similar as shown in Table 6, Models (3) to (5).…”

Section: Robustness Testsmentioning

confidence: 99%

Is Economic Uncertainty a Risk Factor in Bank Loan Pricing Decisions? International Evidence

Ashraf

2021

Risks

View full text Add to dashboard Cite

Uncertainty in economic environment leads economic agents to act cautiously. In this paper, we postulate that such uncertainty leads banks to charge higher interest rate on loans. Measuring aggregate country-level economic uncertainty with the World Uncertainty Index (WUI) and using a bank-level dataset from 88 countries over the period 1998–2017, we find that heightened economic uncertainty increases bank loan interest rates. Specifically, bank loan interest rates rise by 20.67 basis points with a one standard deviation increase in WUI. Our results are robust when we use alternative proxy of uncertainty, include additional controls in the model, and extend the sample size. We also observe that WUI index is better at measuring local economic uncertainty as compared to the Economic Policy Uncertainty (EPU) index. Overall, this study provides evidence that bank price in economic uncertainty is an important risk while setting interest rates on bank loans.

show abstract

“…More recently, the MENA region has been disrupted by profound political and socio-economic transformations, with strong ramifications on the broader business environment. The countries under study witnessed substantial changes in governance in response to widespread social unrest and political turbulences, which even created another barrier for SMEs as cost of financing has increased (Belkhir et al, 2017 ). This social turmoil may be relatively interpreted as an emergence of new post-liberalisation social arrangements aiming at sustainable amelioration of socio-economic conditions, especially employment for the educated youth (EBRS, 2016 ).…”

Section: Introductionmentioning

confidence: 99%

Assessing the Innovation-finance Nexus for SMEs: Evidence from the Arab Region (MENA)

Bakhouche

2021

J Knowl Econ

View full text Add to dashboard Cite

Political risk and the cost of capital in the MENA region

Cited by 35 publications

References 31 publications

Firm‐level political risk and Shari’ah compliance: equity capital cost and payouts policy

Firm‐level political risk and Shari’ah compliance: equity capital cost and payouts policy

Is Economic Uncertainty a Risk Factor in Bank Loan Pricing Decisions? International Evidence

Assessing the Innovation-finance Nexus for SMEs: Evidence from the Arab Region (MENA)

Contact Info

Product

Resources

About