Political Risk Research Articles

THE MANAGEMENT OF FINANCES IN INTERNATIONAL PROJECTS: OPTIMIZING COSTS AND ENSURING SUCCESS THROUGH GLOBAL INVESTMENTS AND FINANCIAL MANAGEMENT

In the course of writing the scientific article, an in-depth study of aspects of financial management in the context of international projects was conducted. The focus was on analyzing cost optimization strategies and achieving success in a global investment and financial management environment. The conducted research shows that in the modern world of globalization, it is important to understand and effectively implement financial management strategies that take into account the unique aspects of international business. Particular attention is paid to the identification of risks related to the external environment, such as currency fluctuations, political and economic risks, which affect the effectiveness of financial decisions. Particular attention is paid to the use of specialized financial instruments to reduce risks, such as risk management and multi-currency settlements. The article analyzes in detail the influence of financial decisions on the effectiveness of international projects, emphasizing the strategic context of profit maximization and ensuring the stability of the financial position. The study of the interaction of financial mechanisms in international transactions takes place in the context of the unique challenges of the global business environment, including currency fluctuations and political and economic risk. In addition, the article summarizes recommendations and strategies aimed at achieving maximum efficiency and sustainability for international projects through careful strategic planning and cost optimization. A detailed analysis of various mechanisms of financial management in the context of global investments has revealed key principles that can serve as a basis for solving complex financial management tasks in international business.

Ключевые риски развития транспортно-логистического проекта «Средний коридор»

The article deals with the problem of creating meridian transport logistics routes along the China–Europe line using the example of the Middle Corridor. The position of the transit states of the South Caucasus within the framework of this route (Azerbaijan and Georgia) is assessed, the current state and dynamics of the develop-ment of the Middle Corridor are investigated. The article also highlights and analyzes the key political and eco-nomic risks affecting the dynamics of transport and logistics ties in the region in the context of territorial con-flicts in the South Caucasus, the conduct of a special military operation in Ukraine, tensions between China and the collective West, as well as in the light of the influence of other factors of modern geopolitics. It is concluded that Russia’s position on the issue under consideration is determined by its own interests, according to which priority in cooperation is given to Iran and the countries of the Transcaucasia, since the construction of the North–South route will contribute to the development of the region under consideration, ensuring stability and security in the South Caucasus without prejudice to national security.

Infrastructure fund as an alternative driver in the implementation of green energy policy in European countries

The growing demand for electricity increases investments in green energy infrastructure worldwide, posing a challenge to the budgets of less wealthy countries. So far, the search for a solution has not included infrastructure funds (IFs) as alternative drivers for financing energy infrastructure. The study aims to characterize investment in energy infrastructure in Europe made by IFs. The paper's novelty is to begin the discussion and research on IF's investments in energy infrastructure. So far, there is little or no literature nor analysis available worldwide. The research examines existing data (desk research). Data from the Preqin database on all 549 IFs investing in energy infrastructure in Europe was analyzed. Thus, the research sample covered the entire population, and so the study's conclusions can be generalized to the entire population. The findings show that IFs effectively implement the green energy policy, hedge various investment risk areas, and relieve the government budget. Moreover, the characteristics of IFs that invest in energy infrastructure indicate a transition toward investments in renewable energy projects. IFs investments in renewable energy infrastructure are made in developed countries with stable economies. Thus, there are fewer IFs energy investments in Eastern Europe. However, the profitability of IFs focused on green energy infrastructure in Eastern Europe is higher than in Western and Central Europe, indicating a significant potential development in this region. It is because Eastern European countries are less politically and economically mature; their laws, regulations, and rules are often revised, which creates unpredictable conditions that might discourage potential investors. At the same time, IFs' risk mitigation strategy (hedging geographical, political, and legal risks) pushes their investments away from Eastern Europe. In conclusion, the paper may increase decision-makers' awareness of employing IFs to implement the green energy policy and encourage legislators to create appropriate and stable conditions for enabling energy investments by vehicles such as IFs in less affluent Eastern European countries.

Double jeopardy: FCPA enforcement and MNC risk-mitigation strategies

Does transnational anti-bribery enforcement affect the risk-mitigation strategies of firms? This paper uses an original dataset on the enforcement actions of the Foreign Corrupt Practices Act (FCPA) to examine the law’s impact on corporate behavior and political risks for multinational corporations (MNCs). I argue that corrupt institutions are not necessarily undesirable for foreign investors. Foreign firms seek above-normal returns in high-risk markets through informal exchanges with the host government. FCPA enforcement provides a “fire alarm” that affects firms differently given their sensitivity to corruption concerns. FCPA enforcement has unequal deterrence against corporate misconduct, encouraging some firms to adopt transparency norms while incentivizing other firms to be more insidious in their corrupt business practices. I use a partial observability bivariate probit model to estimate the unobservable propensity of firms to engage in corrupt exchanges. Then I examine the impact of FCPA enforcement on Chinese FDI, and find that Chinese investments are deterred from markets with robust legal institutions. The FCPA’s deterrence effects against corrupt competitors is a positive outcome for U.S. MNCs. However, American companies experience diminished returns in countries with strong investor protection regimes. External legal interventions under the FCPA generate regulatory burdens on U.S. that limit their business opportunities.

Enterprise Financial Risks: Take Amyris Inc. as an Example

In today's economic environment, companies will face all kinds of risks, including environmental, political, financial pressure and other risks. If the internal management of the company cannot accurately predict the risk and take appropriate measures to deal with the risks, the company will have financial risks and face the consequences of bankruptcy. In order to help companies with early warning, analysis and dealing with financial risks, it is essential to take a specific company as a case study to deeply understand financial risk. This paper collects indicators in the financial statements of Amyris Inc. from the year 2018 to 2022, uses the Z-score model to evaluate the bankruptcy probability of the company from the year 2018 to 2022, analyzes the internal operation situation of Amyris company, the causes of the internal financial risks of the company, and provides corresponding suggestions for the subsequent restructuring of the company on this basis.

Emerging market multinationals and international investment agreements

This study investigates the effects of international investment agreements (IIAs) on the internationalization decisions of emerging market multinationals (EMNEs). Drawing on the POLI advantage framework, we argue that bilateral investment treaties (BITs) add to the political and institutional capabilities of EMNEs, enhancing their OLI advantages in host countries. We identify two mechanisms through which BITs facilitate EMNEs’ internationalization: by offsetting political risk and by mitigating the informational asymmetries and transaction costs associated with investing in unfamiliar destinations. We probe the plausibility of our claims with data from an original survey of firms in four emerging economies and a larger sample of bilateral FDI flows from UNCTAD’s FDI/MNEs database. Our findings show a positive association between BITs and FDI from the South, especially in politically unstable and unfamiliar contexts. Apart from adding to the International Business literature on EMNEs, this study contributes to International Political Economy scholarship on FDI by highlighting the growing relevance of South-South IIAs.

Firm-level political risk and equity issuance

We examine whether firm-level political risk influences the issuance of equity (debt) to finance corporate investment. With a sample of 64,693 firm-quarter observations from 2002 to 2020, we find that firm-level political risk is significantly and positively associated with subsequent equity issuance as opposed to debt issuance. To mitigate endogeneity, we estimate firm fixed-effects regression, perform nearest-neighbor score matching technique and Heckman’s (1979) two-step correction procedure, and employ gubernatorial elections in different states of the U.S. as a shock to the firm-level political risk. We also test for two potential economic mechanisms, financial flexibility and information asymmetry, and find that our baseline results are more pronounced for these channels. Our study presents new evidence on firms’ financing choices in the presence of firm-level political risk.

Exchange rates and political uncertainty: the Brexit case

AbstractThis paper studies the impact of political risk on exchange rates. We focus on the Brexit Referendum as it provides a natural experiment where both exchange rate expectations and a time‐varying political risk factor can be measured directly. We build a portfolio model that relates changes in the Leave probability to changes of the British pound's market price, both via expectations and via a political risk factor. We estimate the model for multilateral and bilateral British pound exchange rates. We find that the Leave probability predicts a depreciation of the pound, consistent with the outcome post‐referendum, and that the time‐varying political risk affects exchange rates independently.

Uses of scientific discourses and markers in shark attack risk management on Reunion Island

The article discusses how the uses of scientific discourses and markers, by activists and policymakers have been perceived by scientific experts and journalists and generated tensions related to science use in managing shark attack risk on Reunion Island. Following a series of shark attacks in 2011, a scientific research program was funded by French authorities to help political decision-making to reduce shark attack risk on the island's west coast, from 2011 to 2015. This program collected a large set of data to understand the ecology of the shark species implied in the attacks. The authorities have also funded a selective fishing program as an operational management device, which opposed activists from sea users' NGOs requiring shark fishing and environmental NGOs requiring sharks' protection. Based on sixteen semi-directional interviews led with local scientific experts, activists, journalists and a mandated fisherman, the study explores how activists and policymakers are perceived as having reappropriated scientific discourses to legitimize their position on shark risk management in Reunion Island. The scientific experts’ perception of activists depends on the epistemology of their discipline and the values they carry about the management of living beings. Otherwise, the political shark risk management strategy on Reunion Island is perceived as preferring to use scientific rationality instead of social claims to justify public policies. These uses of science generated conflicts between scientific experts, policymakers and sea users, and argue for the need of a dialogical process between parties to manage shark attack unpredictable risk, by better considering its social interpretation.

ESG engagement, country-level political risk and bank liquidity creation

This study explores the influence of banks' environmental, social, and governance (ESG) performance and country-level risk factors on liquidity creation. Utilizing a distinctive sample of 2103 bank-year observations from 2000 to 2020 in Asia, the study finds that banks' ESG performance exerts a positive impact on bank liquidity creation. Furthermore, this relationship is more prominent in countries with high geopolitical risk and corruption risk and low levels of democratization. To address endogeneity concerns, a two-stage least squares regression is employed using two instrumental variables, and the findings remain robust. These findings have practical implications for banks and policymakers to consider a country's political risk when promoting ESG activities and facilitating liquidity creation.

Doing more with less: A proposal to advance cigarette packaging regulations in the United States

Cigarette packages are potent marketing tools. Following guidance from the WHO Framework Convention on Tobacco Control, many countries have sought to diminish this marketing power by mandating that (1) large graphic health warnings be affixed to the packages (i.e., text warnings combined with graphic images of the health consequences of smoking) and (2) all packages be fully “plain” in their design (i.e., all packages use the same drab/bland color and font type; no brand logos, other colors, or designs are permitted). Yet, the United States lags other countries in implementing regulations designed to blunt the marketing power of cigarette packages. This is not because of a lack of effort on the part of the Food and Drug Administration, the main governmental body charged with regulating tobacco products in the United States. Rather, it is because the regulatory options that that have been advanced in the country (e.g., graphic health warnings) have not been found - yet - to be legally feasible by its courts. This commentary works through some of the conceptual, practical, and legal issues regarding packaging regulations in the United States. It considers the political and bureaucratic risks involved with issuing new regulations. The overall intent is to prompt our field to think creatively about what is realistic in this regulatory space and to offer a novel perspective that may help move the United States tobacco control community forward in its efforts to reduce the promotional power of cigarette packages.

Direct and indirect influence of natural resources and regional integration on green growth: Exploring the role of political risk in South Asia

Within the context of sustainability, an integral focus of ongoing research is centred on cultivating economic expansion that prioritizes environmental friendliness and reduces resource dependence. This approach is commonly referred to as green economic growth. Hence, the present study strives to explore the heterogeneous effects of regional trade and economic integration, natural resource reliance, and political risk while also examining how regional integration index combined with natural resource factors influences the green growth trajectory of selected south Asian countries. The cross-sectional dependence and slope heterogeneity of the countries have been examined. Stationarity properties are checked before proceeding to the long-run relationship and empirical estimation procedure. Method of Moments Quantile Regression is employed to understand the variables' asymmetric association. The outcomes revealed the positive influence of regional integration on green growth, while political risk and natural resources pose a negative impact. It can be observed that the negative consequences of natural resources are neutralized with higher trade and financial integration. Lastly, the causality test is used to investigate the causal association between the variables. The outcomes imply that Asian countries emphasize shaping natural resource extraction policies and stabilizing their political situation to get the maximum benefit from green growth.

Research on the Effects of "Belt and Road" Port Investments and Political Risks of Political Parties A Case Study of the Port of Piraeus

Under the promotion of the "Belt and Road" initiative, Chinese enterprises have actively engaged in overseas port investments. During the investment process, Chinese enterprises have encountered party resistance and changes in government. Therefore, the effective response to political risks of political parties directly influences the success or failure of port investments. This paper takes the Port of Piraeus as a case study, first outlining the project's timeline and content and analyzing the investment effects. Subsequently, it expounds on political risks of political parties associated with the project. Finally, it proposes measures to address political risks of political parties, providing insights for China's overseas port investments.

The role of green finance in mitigating climate change risks: a quantitative analysis of sustainable investments.

The dire problem of climate change has garnered more attention in recent years and, with it, the necessity of reducing its damaging effects on the environment. Nevertheless, despite the green finance index's (GFI) potential advantages in combating climate change, empirical studies on the subject's consequences have been few, mostly because of the index's restricted data availability. This study's primary goal is to close this gap by employing panel data analysis to investigate the environmental effects of GFI in China between 2004 and 2021. Econometric methods like the Driscoll-Kraay standard error and other robustness test models are used to look into the links between political risk, green finance, the ecological footprint, and the economic complexity index. According to the research findings, there is a 0.31% and 0.81% decrease in ecological footprint resulting from the implementation of GFI and rises in GDP (gross domestic product). These results suggest that these strategies could play a major role in establishing a sustainable environment. However, in the chosen countries, the ecological footprint increases by 0.81% and 0.80%, respectively, due to the presence of political risk and economic complexity. This study suggests that government involvement is necessary to reduce carbon footprints and protect the ecosystem, based on these empirical findings. Implementing green financing initiatives, fostering technological development, economic diversification, and fostering a stable political environment are all ways to achieve sustainable investments.

Strictly unofficial business: Australia’s trade policy towards the People’s Republic of China, 1951 to 1966

Between 1951 and 1966, Australia engaged in an expanding trade with China without extending diplomatic recognition. The Liberal–Country Coalition government not only allowed, but encouraged this connection, mostly by facilitating the exchanges of private citizens and even officials and, increasingly, providing export subsidies. It did so selectively, balancing between the eagerness of businesses and some officials, the pressure from the United States, and domestic critiques seeking either a more total containment of China or to pursue diplomacy with Beijing. By the end of the period, Canberra settled on the formula of making a sizable trade surplus with China without taking the political risk of either conducting formal diplomacy or modifying existing trade restrictions. The coincidence of needs saw the trade relationship assuming some significance in Australia’s agricultural sector, especially wheat production. But the political limitation to this trade also became clear, as did the constraints suffered by its Labor critics.

Presenting a Model for Determining Key Performance Indicators of the Insurance Industry on the Development of the Entrepreneurial Ecosystem Using the Panel Data Approach in Selected Countries (2010-2020)

The objective of the present article is to propose a model for determining the key performance indicators (KPIs) of the insurance industry on the development of the entrepreneurial ecosystem using the panel data approach in selected countries during the period from 2010 to 2020. The statistical population of this study includes selected countries (the Philippines, Iran, Kazakhstan, South Africa, Hungary, Sweden, Poland, Peru, Mexico, Argentina, Brazil, Colombia, Malaysia, Australia, Thailand, Croatia, the United States, the United Kingdom, and Norway), utilizing the panel data method. For this purpose, data related to the selected countries over the 2010-2020 period were employed, using the panel data approach. Eviews version 21 software was used for data analysis. The analysis results indicated a significant correlation between the performance of the insurance industry and the variables of entrepreneurial development, insurance penetration rate, political risk, gross domestic product per capita, and the rule of law. The Levin, Lin, and Chu test was used to measure the reliability of the indicators. The results showed that all the examined indicators are reliable. The results of the co-integration test revealed a strong long-term relationship between the variables used. The estimated coefficient of the model for the variables—entrepreneurial development, insurance penetration rate, political risk, gross domestic product per capita, the rule of law, and insurance industry performance—are -0.3784, -0.3728, -0.2456, -0.2361, -0.2541, and 0.2314, respectively. For instance, the estimated coefficient for gross domestic product (GDP) per capita is -0.2361, indicating that a 1% increase (or decrease) in GDP per capita results in a 0.2361% decrease (or increase) in the insurance industry's performance indicator.

МЕТОДИ ОЦІНКИ РІВНЯ ІНВЕСТИЦІЙНОЇ ПРИВАБЛИВОСТІ ПІДПРИЄМСТВА В ПОВОЄННИЙ ПЕРІОД

The article examines and describes the methods of assessing the investment attractiveness of an enterprise, such as quantitative and qualitative. Each of the components of these methods is highlighted. The expediency of using a comprehensive approach that combines these methods is determined, and the need to use additional conditions, such as risk assessment, comparison of the dynamics of indicators and their comparison with the indicators of other companies in the same industry, is also indicated. Attention is focused on the properties of assessing the investment attractiveness of the enterprise in the post-war period, such as the level of destruction – the degree of damage to property and infrastructure can significantly affect the restoration of work and require significant investments. It is important to assess the scale of destruction, the terms and cost of restoration works; infrastructure restoration – availability of electricity, water, transport and other critical resources may be limited. It is necessary to take into account the risks of delays and additional costs associated with infrastructure restoration; government support – governments of countries affected by war often offer programs to help businesses. It is important to know about the available programs, their conditions and opportunities for receiving assistance; changing market environment – Consumer needs and expectations may change after the war. It is necessary to research new market trends and adapt your strategy to them; competition – war can lead to changes in the competitive environment. It is important to assess new competitors, their strengths and weaknesses; risks – political risks, risks of default, risks of changes in legislation may be higher in the post-war period. It is important to conduct a thorough analysis of risks and develop a plan to minimize them and uncertainty – the economic situation and political climate in the post-war period can be unstable. It is important to consider the factors of uncertainty and to respond flexibly to changes.

The Political Economy of Investor Protection: Holdup, Political Risk, and Institutional Solutions

The Political Economy of Investor Protection: Holdup, Political Risk, and Institutional Solutions

Supply risk considerations for photoelectrochemical water splitting materials

Absorber materials for photoelectrochemical water splitting have supply risks emerging from supply, demand, concentration, and political risks.

Does CEO Pay Sensitivity Mitigate Earnings Management Induced by Political Risk?

Does CEO Pay Sensitivity Mitigate Earnings Management Induced by Political Risk?