Perceptions Of Political Risk Research Articles

Foreign Aid’s Effect on Political Risks for Foreign Direct Investment: A Literature Review

The last decade has seen an increasing focus on the involvement of the private sector in international sustainable development, particularly in high-risk jurisdictions. This involvement encompasses a broad spectrum, incorporating innovative private sector instruments—now acknowledged as ODA-eligible by the OECD—as well as traditional tools of external official support to developing countries, which remain the primary contributors to ODA flows. This literature review aims to consolidate the academic exploration of the enduring classic foreign aid tools' impact on the political risks associated with foreign direct investment (FDI), and identifies prevalent limitations while suggesting approaches to overcome these challenges.The first section delineates the central theme and rationale behind the literature selection process, utilizing the Google Scholar database to contextualize the research within a comprehensive framework. The subsequent section categorizes and compares the most relevant studies based on formal criteria and methodological parameters. Sections three and four critically assess the scholarly contributions in conceptualizing the mitigating influence of foreign aid in general, focusing on its impact on specific political risks such as expropriation, terrorism, and corruption. The concluding section delves into studies that explore foreign aid and foreign direct investment flows from China, the largest non-Western donor.A bibliometric analysis reveals a noteworthy disparity between research attention and policymaking focus on the subject matter. Notably, the selected papers fail to comprehensively cover the full spectrum of primary extra-legal and legal-governmental political risks for transnational businesses. Scholars' assessments of foreign aid's mitigating effect often lack differentiation between grants and loans or between flows directed to different sectors, as well as the distinction between aid routed through public institutions and bypassing them. Notably absent is a comprehensive analysis encompassing the complete range of 'established' Western and emerging non-Western aid providers, or an exploration of aid flows from non-OECD countries other than China. Most research focuses on Africa and fails to differentiate between recipients based on fragility, income levels, or other relevant categorizations. Moreover, the researchers have yet to delve into data post the COVID-19 outbreak, a critical period that significantly altered perceptions of political risk, foreign aid, and FDI flows. The literature review illuminates a research gap awaiting substantial exploration.

Risk Perception and Behavioural Intention of Tourists Towards Risk-Prone Destinations: The Mediating Role of Place Attachment

The aim of this study is to explore and analyze tourists’ behaviour towards Kashmir Valley, India, specifically in terms of their place attachment and intended future behaviour in response to perceived political risk. The study also examines the mediating role of two facets of place attachment (place dependence and place identity) in therelationship between perceived political risk and tourists’ behavioural intentions. The study employed a self-administered questionnaire to gather data from 286 respondents using convenience sampling. Additionally, the structural equation modelling (SEM) approach was employed to analyze the data. The findings showed that perceived political risk does not directly affect behavioural intention; however, political risk perception negatively impacts both place dependence and place identity. Moreover, the results suggest that place dependence and place identity are positively related to behavioural intention. Finally, place dependence and place identity have a fully mediating role in the relationship between perceived political risk and behavioural intention. The results of this study are anticipated to aid destination marketers in understanding how perceived political risk affects the formation of tourists’ place attachment and their future travel behaviour.

Terror, Political Risk, and Effect on Foreign Direct Investment

ABSTRACT Terrorist attacks have important social, political, and economic effects. One of the effects of terrorism involves the impact on foreign direct investment (FDI). While existing research suggests that terrorism negatively impacts FDI by increasing political risks, it is unclear how the effects of terrorism are conditioned by host country institutions. Political institutions may affect investors’ perceptions of political risk following a terrorist attack by shaping expectations of future political risk. We argue that the conditional effect of institutions and terrorism is non-linear: Terrorism has a negative effect on FDI inflows to countries with a medium level of institutional effectiveness only. Using quantitative analyses of FDI flows and political risk ratings, we show that terrorism has no effect on FDI in host countries with very high or very low levels of political institutional effectiveness. In a qualitative analysis of FDI and terrorism during the civil wars in Algeria and El Salvador, we demonstrate that concerns about institutional effectiveness played an important role in producing disinvestment by foreign investors. This research contributes to the literature on the determinants of FDI, effects of terrorism and political risk, and suggests that institutions play an important role in affecting how investors perceive political risk.

Business across borders: perceptions of political risk in internationalised Brazilian companies

Brazil is an emerging country in terms of political, economic, and social development. Its companies are usually in a scenario of instability, especially since mid-2010. In this context, the paper provides unpublished evidence on political risk perception in companies of diverse branches. The purpose of this study is to analyse the perception of political risk in business abroad by managers of internationalised Brazilian companies. Qualitative and descriptive research was conducted in a multiple case study through document collection and semi-structured interviews. The internationalisation processes of six small and medium-sized Brazilian companies and their managers' political risk perception were investigated. The findings reveal the political risk factors inherent to different environments for internationalised companies in a context of political and economic uncertainties, namely, the internal environment, the external environment and the environment related to the organisation itself.

Business across borders: perceptions of political risk in internationalized Brazilian companies

Business across borders: perceptions of political risk in internationalized Brazilian companies

Initial Management of COVID-19 Outbreak in Mexico

This paper analyzes the initial stage of the pandemic COVID-19 in Mexico. The objective is to test whether the contagion risk perception and the authorities' initial prevention messages influenced the COVID-19 deaths. We estimate longitudinal elasticities of deaths to confirmed COVID-19 cases by accounting for measurement error and endogeneity issues. We find that confirmed cases and poverty levels are endogenous. The limitation arises because of the underreported COVID-19 deaths. Our contribution is to identify an association with the individual and political risk perception to the number of COVID-19 deaths. The results show that municipalities with more confirmed cases aware of being in contact with another person affected by COVID-19 have fewer deaths. However, emergency management, federal and state, had weak effects of reducing the lethality rate. We infer that better individual risk awareness is an essential factor in reducing the number of deaths from COVID-19.

The influence of perceived host country political risk on foreign subunits' supplier development strategies

AbstractRecent protectionist trends (e.g., trade wars, Brexit) have challenged the stability of the global supply chains (SCs) of multinational corporations. While the SC and operations management (SC/OM) literature has examined how such sources of political risk influence strategic SC/OM decisions at the global level, we know little about how host country political risk influences the SC/OM practices of foreign subunits at the local level. We conducted an exploratory, multiple‐case study of western subunits operating in China to investigate whether managers of foreign subunits in a host country perceive political risk; and if so, how they adapt their SC/OM strategic choices to reduce its impact on their subunits. Our empirical findings suggest that variations in political risk perceptions create different political legitimacy goals that subunits attempt to meet by adapting their supplier development strategies. We induct a process model and identify three archetypes of supplier development strategy—self‐centered, collaborative, and voluntary—adopted by subunits to shape their legitimacy and mitigate political risk. We contribute to the SC/OM literature by theorizing SC/OM managers' perceived political risk, showing how foreign subunits may use supplier development to influence how the host government views them, and by complementing traditional “corporate” legitimacy‐seeking strategies with new “SC/OM” legitimacy‐seeking strategies.

Framing professional climate risk knowledge: Extreme weather events as drivers of adaptation innovation in Copenhagen, Denmark

While existing research suggests that extreme weather events influence perceptions of climate risk, the mechanisms shaping innovation in urban climate adaptation work remain understudied. In this article, we inquire into how recent localized extreme weather events in Copenhagen, Denmark, have spurred processes of innovation in adaptation pathways. We suggest that risk-framing work by professionals plays an important part in understanding urban innovation processes, since changes in public risk perceptions become part of collaborative learning processes amongst communities of professionals. Such learning processes can result in new technological pathways of innovation, as part of wider urban knowledge systems. We analyze these processes through 32 semi-structured interviews with professionals involved in creating knowledge about climate adaptation in urban Copenhagen. Specifically, we compare two knowledge and innovation pathways, for pluvial and coastal flooding, representing, respectively, an actualized extreme event and a near miss. Overall, we find that the presence (pluvial) or absence (coastal) of damage from localized extreme events matters to the knowledge and innovation pathways. Innovation in dominant technological solution spans, as well as related institutional decision-making routines, is more pervasive in pluvial flooding, whereas coastal flooding is widely considered as temporally distant. Analytically, we suggest that a distinction between regulative and expanded institutional framings of risk matters to how professionals understand their own room for manoeuvre. Recent pluvial flood events have not changed the official technical risk assessments. Yet when professionals consider such events in an expanded institutional frame, they incorporate increased public and political risk perceptions as they construct pathways for further innovation.

한국사회의 공정성이 사회·경제·정치 위험인식에 미치는 영향 : 세대구분의 조절효과를 중심으로

본 연구는 한국 사회의 다양한 공정성 수준이 사회·경제·정치 위험인식에 미치는 영향을 살펴보고, 나아가 이들의 관계에서 발견되는 세대구분에 따른 조절효과를 확인하기 위해서 기획되었다. 분석 자료는 “한국종합사회조사 2014”를 선택하였으며 분석방법으로는 다중선형회귀모형을 사용하였다. 분석 결과를 요약하면 다음과 같다. 첫째, 사회위험인식에는 분배공정성만이 통계적으로 유의미한 결과를 보여주었다. 즉, 분배공정성이 낮으면 사회위험인식은 부정적으로 나타났다. 또한 사후공정성과 사회위험인식의 관계에서 산업화세대가 에코세대에 비해 위험인식이 더 높았다. 둘째 경제 위험인식에서는 분배 공정성과 절차공정성이 낮을수록 경제위험인식이 높았다. 하지만 공정성과 경제위험인식의 관계에서는 세대구분에 따른 조절효과가 나타나지 않았다. 마지막으로 정치위험인식에는 분배공정성과 절차공정성, 사후공정성이 낮을수록 정치위험인식이 높았다. 또한 사후공정성과 정치위험인식의 관계에서 베이비붐 세대에 비해 에코세대가 정치위험인식이 더 높았다.

Navigating the Political Landscape of Australian Criminal Justice Reform: Senior Policy-makers on Alternatives to Incarceration

Political ideology and populism are often thought to be major impediments to criminal justice reform. Our research has attempted to deconstruct these ideas so that the robustness of the ‘punitive turn’ in criminal justice policy can be better understood. This article reports upon in-depth interviews conducted with five very senior criminal justice policy-makers, each of whom was broadly sympathetic to reforming criminal justice policy to achieve the goal of lower incarceration levels. The interviews reveal that these policy-makers conceived of prison reform primarily in terms of political risk, especially when reform was related to the adoption of prison alternatives and models that focus on ‘decarceration’. Furthermore, policymakers' perceptions of political risk were intricately bound up with concerns about potential public policy and program failure. This research indicates the need to develop political will for reform, alongside the further development of the myriad evaluation and policy development processes required to enable successful reform in the criminal justice space.

The management of political risk

We explore a long standing prediction in the international business literature that managers’ subjective perceptions of political risk – not just the level of risk – are important for how firms manage political risk. The importance attributed to political risk by corporate executives has increased over the last 15 years and our results show that political risk is now considered more important than commodity (input) risk. Our analysis suggests that nearly 50% of firms avoid (not simply reduce) foreign direct investment because of political risk. Using a unique survey-based psychometric evaluation of manager risk aversion, we show that firms with risk averse executives are more likely to avoid investment in politically risky countries – a key implication of behavioral models. This relation is economically stronger when agency problems are more likely to be severe: for example, when executives are less aligned with shareholder value maximization, and when executives are younger (and therefore might put their personal career’ concerns in front of shareholders’ interests). While numerous studies have shown that political risk affects foreign direct investment using objective measures of such risk (electoral uncertainty, conflicts, etc.), our study documents that executives’ subjective perceptions of political risk are also important for political risk management.

The Management of Political Risk

We explore a long standing prediction in the international business literature that managers’ subjective perceptions of political risk – not just the level of risk – are important for how firms manage political risk. The importance attributed to political risk by corporate executives has increased over the last 15 years and our results show that political risk is now considered more important than commodity (input) risk. Our analysis suggests that nearly 50% of firms avoid (not simply reduce) foreign direct investment because of political risk. Using a unique survey-based psychometric evaluation of manager risk aversion, we show that firms with risk averse executives are more likely to avoid investment in politically risky countries – a key implication of behavioral models. This relation is economically stronger when agency problems are more likely to be severe: for example, when executives are less aligned with shareholder value maximization, and when executives are younger (and therefore might put their personal career’ concerns in front of shareholders’ interests). While numerous studies have shown that political risk affects foreign direct investment using objective measures of such risk (electoral uncertainty, conflicts, etc.), our study documents that executives’ subjective perceptions of political risk are also important for political risk management.

Political risk perception in Indonesian power projects

PurposeThe purpose of this study is to identify and to assess specific political risks associated with Indonesia's public private partnership (PPP) power projects and their generally available mitigating measures, based on the perception of the main stakeholders (government, investors, lenders and insurers).Design/methodology/approachThe approach taken is: a comprehensive literature review to identify an initial list of specific political risks associated with Indonesia's PPP power projects and generally available mitigating measures for these risks; unstructured interviews and discussions to gather recent issues related to the study and to filter the risks and project measures identified at previous step; and finally a survey conducted with questionnaires in order to evaluate the risks and their allocation, to suggest corresponding mitigating measures.FindingsThe study identified that the political risk perception for Indonesian power projects is still relatively high, due to its legal and regulatory risk and breach of contract risk. Viable government support is also desired by most of the players instead of having political risk insurance as the risk mitigation strategy.Originality/valueThe study has identified a political risk mitigation strategy for infrastructure investment in the Indonesian power sector. Based on that, this study contributes as a scientific exercise in measuring the political risks perception of all stakeholders, which can be useful for all involved parties to mitigate this type of risk successfully.

Risk Exposure and Recovery Assessment under a Guarantee in a Water Project

The objective of this article is to assess the risk exposure of a ministry of finance (MOF), a foreign lender, and the Asian Development Bank (ADB) under a guarantee in a water project in an Asian country. Also, the added value to all three parties that ADB9S mediation may offer is determined. There is a state owned water project company (WPC) in an Asian country. A foreign lender in this project wants a guarantee from the Ministry of Finance (MOF) covering debt-service payments of the state-owned project company. The foreign lender also wants the ADB to issue a guarantee against breach of contract from the MOF and to cover the MOF9s guarantee obligations. The ADB will issue the guarantee only on the condition of a counter-guarantee from the MOF. The risk exposure assessment uses the method for “quantifying qualitative information on risks” (QQIR) described in an article in the Winter 2008 issue of the Journal of Structured Finance. (“The Quantification and Financial Impact of Political Risk Perceptions on Infrastructure Projects in Asia,” by Tillmann Sachs, Robert L.K. Tiong, and Daniel Wagner). The QQIR method translates expert opinion on perceived risk factors into probability density functions that are the input to stochastic simulations and recovery-rate determination. <b>TOPICS:</b>Risk management, fixed income and structured finance

The Quantification and Financial Impact of Political Risk Perceptions on Infrastructure Projects in Asia

Political risks relate to arbitrary or discriminatory actions taken by home or host governments, political groups, or individuals that have an adverse impact on international trade or investment transactions. Many political risks lack historical or numerical data and are often defined intuitively by project equity investors, lenders, or equipment suppliers. Thus the assessment of political risk has traditionally been more of an art than a science. In this article, the authors describe a methodology they have developed for quantifying qualitative information on risks (the “QQIR Method”) in structured finance transactions that adds value to comprehensive and due diligence risk assessment in such transactions by bridging the gap between qualitative and quantitative risk-assessment methods. The QQIR Method allows perceptions of risks to be quantified. <b>TOPICS:</b>Risk management, fixed income and structured finance

Political risk quantification using fuzzy set approach

Negative perceptions of political risk can prevent capital from being committed to support cross‐border investment. Information about risks that impact infra‐structure projects is often vague, imprecise, subjective, or ambiguous. Political risks in developing countries also often lack meaningful historical and numerical data. A novel fuzzy set approach for quantifying qualitative information on risks (QQIR) in structured finance transactions that bridges the gap between qualitative and quantitative risk assessment methods has been developed. The QQIR Method is validated empirically through the results of an international survey to determine the impact of perceived political risk on Asian infrastructure projects. The impact is measured by the effect on financial project criteria. The impact was assessed across 14 Asian countries and 14 infrastructure sectors. The survey findings are validated by triangulation of three data sets and employing non‐parametric statistics. The validation shows that in 77.5% of all observations the QQIR Method produces mean results that are within 0.85 standard deviations of the absolute values, without elimination of any seemingly unusual or unreasonable responses or data. The validation also shows that with increasing perceived risks, the costs of equity investment, debt finance, and insurance also increase. The QQIR Method is thus a valid tool to quantify perceptions on risks. In this case it has been applied to political risks, but the Method is generic and may be applied to any problem set in which perceptions can be structured and assessed with opinions.

Managerial perceptions of political risk in international projects

This paper examines the vulnerability of international projects to political risks. A brief review of the literature on general risks – natural, financial, cultural and political – is undertaken and then a more detailed review of the literature on political risk is presented. It was found that relatively few studies of political risk, particularly in the context of international projects, have been carried out. More particularly the focus has been almost exclusively on developed, rather than developing, countries.Questionnaires were distributed therefore to the entire target population of Jordanian international projects. The findings suggest that the political risk associated with international projects poses a threat to the majority of respondents and that the vulnerability to political risk is related to a firm’s degree of internationalisation. International projects are more concerned about host-society and interstate related risks than host-government related risks.

Managing Post-Privatisation Political and Regulatory Risks in Nigeria—a Law and Policy Perspective

In an effort to revive the ailing economy and join the global markets, successive Nigerian governments since 1986, have taken measures that were aimed at liberalising the economy and creating a conducive atmosphere for more private, especially foreign direct investment, long recognised as engines of growth and development and prosperity. Among the policy initiatives were: the repeal or amendment of certain laws and regulations that restricted foreign investment, and privatisation of state-owned enterprises. These reform measures have reduced the political risk perception of the country by foreign investors as evidenced in the increased level of foreign participation in the telecommunications, and oil and gas industries. However, with liberalisation and privatisation, new forms of political and regulatory risks emerge that require new management techniques. These risks include possible changes in environmental and social regulations, discriminatory treatment of the private/foreign investor by regulatory agencies through licensing, taxation and enforcement of business laws, control of essential facilities by dominant enterprises, lack of observance of the rule of law and other good governance issues. Both the government and private investors should give due consideration to such risks and take appropriate measures to reduce or minimise them so as to fully realise the benefits of a liberalised economy. For government, reducing the risks increases its credibility while the private investor stands to gain the most from his investment. This article examines such risks and how to reduce them.

Determinants of New Zealand Bond Yields

This paper examines the driving factors of New Zealand bond yields over the 1988-1997 period. The results indicate that: . the general analytical framework implied by the Uncovered Interest Parity (UIP) relation finds some support in the data. . in the long run, short term real bond yields are related to US real bond yields, currency expectations and expectations of the future stance of domestic monetary policy vis a vis the stance offshore. . long-term real bond yields are related to Australian real bond yields, currency expectations, inflation uncertainty and relative monetary policy expectations. . in recent years, domestic bond yields have been more closely related to offshore yields suggesting increased integration between the domestic and international capital markets. . increased perceptions of political risk appears to have played an important role in the rise in domestic long bond yields during the first half of 1996.

Risk perception by UK firms towards the Russian market

One of the factors that affect the foreign market entry decisions of a construction firm is the risk involved. This paper reviews the concept of risk and its manifestations in the volatile socio-economic and political climate of Russia, a market previously inaccessible to the international construction industry and now full of opportunities and threats. It also presents the perceptions of political risk and Russia's market potential held by the marketing managers of UK construction firms that are involved in the Russian market. Conforming to international marketing theory, their decisions are influenced by a number of factors, with political risk being one of them. The paper additionally establishes that practicing marketers' perceptions vary according to the time and form of involvement in the market.