Abstract
This paper investigates the risk-sharing and risk-taking effects of multidimensional globalization and government regulation on multifaceted country risk by using a panel data of 77 countries over the period 1984–2015. To gain further insights into this issue, we also examine the roles of banking activities, economic development, and geographic regions on the relationship between globalization, government regulation, and country risk. Our main empirical results show that a higher level of globalization and less restricted government regulation of the financial sector significantly decrease country risks, supporting the risk-sharing hypothesis in our study. In addition, bank performance, bank concentration, and economic development play an essential role as conditional factors to influence the country risk. This finding offers several useful insights for policymakers and researchers.
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