Conducting Business in Eastern Europe:: Risk–Return Perspectives of Senior Financial Executives

Abstract

Ten years ago we published an article that documented the views of chief financial officers about doing business in Eastern Europe. Since then there has been progress toward economic stabilization and the development of market economies in the region. These changes and other significant events in the last decade have affected the conduct of business in Eastern Europe. In this present paper, we update the findings of our earlier study and add new perspectives. A mail survey targeting senior US financial executives and follow up interviews were utilized. It appears the risk–return tradeoff for US firms of investment in Eastern Europe has changed. The classic tradeoff now seems to exist in product and service markets: for a variety of reasons risk is perceived to be lower than a decade ago, but so are returns. However, the same does not appear to hold true for financial markets in Eastern Europe where financial executives still perceive market inefficiencies and ineffectiveness. EU accession and adoption of the Euro by Eastern European countries are viewed very positively by US financial executives, and these events may serve to improve the functioning of financial markets there as well.