Abstract
We examine the impact of political risk in the MENA region on the cost at which firms can raise capital. Using the implied cost of equity as a measure of the cost of capital and ICRG's political risk rating as a proxy for political risk, we find that political risk results in a higher cost of capital. Economically, our results suggest that a one standard deviation increase in the political risk index is associated with a 450 basis points increase in the cost of equity capital of MENA firms. Our results are consistent across a battery of robustness checks. Our findings have important policy implications that are relevant to the MENA region and beyond.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.