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Article
Publication date: 1 June 1998

Amjad Hadjikhani

The subject of political risk for project‐selling firms has not been as thoroughly studied as it has for other international modes. This research aims to discuss the…

1653

Abstract

The subject of political risk for project‐selling firms has not been as thoroughly studied as it has for other international modes. This research aims to discuss the behavio‐of project‐selling firms when facing a sudden political crisis. It examines how political turmoil forces the firms to either stay in the market or exit from it and discusses why there is variety in their responses. The study presents three historical cases about three project‐selling firms and discusses the variety in their activities before, during, and after a political crisis. For the analysis, this paper employs the concepts of knowledge and commitment from the network model for the internationalization process. The case analysis is intended to generate a hypothesis about the types of business responses and the reasons for them.

Details

Journal of Business & Industrial Marketing, vol. 13 no. 3
Type: Research Article
ISSN: 0885-8624

Keywords

Article
Publication date: 1 February 1985

Asayehgn Desta

Corporate investment in less developed countries can be a lucrative source of resources and earnings. But how does one minimize the risks—particularly the political risks

Abstract

Corporate investment in less developed countries can be a lucrative source of resources and earnings. But how does one minimize the risks—particularly the political risks? The current trend in risk‐assessment methodology is to use “hard data” rather than subjective analysis. But this can be a drawback because the quantitative methodologies used are often determined by the data available. Presented here is a framework for political risk assessment that does more than simply look at the numbers.

Details

Journal of Business Strategy, vol. 5 no. 4
Type: Research Article
ISSN: 0275-6668

Article
Publication date: 28 December 2021

Fawad Ahmad, Michael Bradbury and Ahsan Habib

This paper aims to examine the association between political connections, political uncertainty and audit fees. The authors use various measures of political connections…

Abstract

Purpose

This paper aims to examine the association between political connections, political uncertainty and audit fees. The authors use various measures of political connections and uncertainty: political connections (civil and military), political events (elections) and a general measure of political stability (i.e. a world bank index).

Design/methodology/approach

The authors measure the association between political connections, political uncertainty and audit fees. Audit fees reflect auditors’ perceptions of risk. The authors examine auditors’ business risk, clients’ audit and business risk after controlling for the variables used in prior audit fee research.

Findings

Results indicate that civil-connected firms pay significantly higher audit fees than non-connected firms owing to the instability of civil-political connections. Military-connected firms pay significantly lower audit fees than non-connected firms owing to the stable form of government. Furthermore, considering high leverage as a measure of clients’ high audit risk and high return-on-assets (ROA) as a measure of clients’ lower business risk, the authors interact leverage and ROA with civil and military connections. The results reveal that these risks moderate the relationship between political connection and audit fees. Election risk is independent of risk associated with political connections. General political stability reinforces the theme that a stable government results in lower risks.

Originality/value

The authors combine cross-sectional measures of political uncertainty (civil or military connections) with time-dependent measures (general measures of political instability and elections).

Details

Managerial Auditing Journal, vol. 37 no. 2
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 31 August 2012

Adel Al Khattab, Jehad Aldehayyat, Mahmaod Alrawad, Sundus Al‐Yatama and Suleiman Al Khattab

Political‐legal risk perception is just as important a consideration in dealing effectively with the threats exposed by international enterprises. This research emphasizes…

2357

Abstract

Purpose

Political‐legal risk perception is just as important a consideration in dealing effectively with the threats exposed by international enterprises. This research emphasizes how important it is to integrate the perception of risk factor into the analysis. This is an essential factor when catastrophic risks are involved. Relatively, nevertheless, little work has been done to explore the concept of political‐legal risk as it applies to international commercial and business applications. The purpose of this research is to first examine the perception of Kuwaiti executives to political‐legal business environment while conducting outward investment and where a number of recent events like those in Tunisia, Egypt, Libya and Yemen illustrate that the rise of enterprises onto the world stage will not necessarily be entirely without risk and second, to explore the correlations between the executives' perceptions of political‐legal variables and enterprise‐specific characteristics.

Design/methodology/approach

A review of the literature relating to risk in international business in both developed and emerging markets is provided. The empirical research was conducted via a questionnaire survey. In line with the research aim, questionnaires were distributed to the entire target population of Kuwaiti international enterprises. Nonparametric statistics were used to analyze the findings.

Findings

The Middle East and North Africa (MENA) region has been shaken like never before. The recent events of the uprising in Tunisia, Egypt, Yemen and Libya and the regional reverberations of the upheaval are unfolding, inter alia, concerns about rising exposure to more risks and the instability in the MENA have reached a fever pitch. Findings of this research suggest that the political‐legal related risks associated with enterprises' activities pose a threat to the majority of executives and the vulnerability to these risks are not related to any enterprise's‐specific characteristics.

Originality/value

The research on international enterprises states that some parts of the globe have remained detached. Given its economic and political importance, the most obvious omission is the Middle East. To date and despite that the region has garnered its fair share of coverage in current news, little is known on management practices by enterprise in the region. This research, therefore, provides empirical evidence of executives' perception of political‐legal business environment in an emerging market context: Kuwait. Furthermore, most recent literature omits oil‐producing nations. Focusing on this oil‐rich region is an attempt to fill this void.

Details

International Journal of Commerce and Management, vol. 22 no. 3
Type: Research Article
ISSN: 1056-9219

Keywords

Book part
Publication date: 29 December 2016

John R. Anchor and Hana Benesova

This chapter seeks to conceptualize a new approach to the identification of the factors influencing the adoption of a political risk assessment (PRA) function. By making…

Abstract

This chapter seeks to conceptualize a new approach to the identification of the factors influencing the adoption of a political risk assessment (PRA) function. By making use of firm value maximization and risk aversion and considering the rationale for risk management activities, a number of determinants are identified which can be deployed in future PRA studies. A model for predicting the PRA adoption decision is proposed. Geographical contextualization in one or more emerging markets (EMs) provides a further dimension of originality as well as reflecting an increasingly important international business phenomenon. Political risk (PR) and political risk assessment (PRA) are of increasing importance in the context of the growth and development of emerging markets (EMs). The latter provide opportunities for inward investment from more developed economies. There has also been a rapid growth in outward foreign direct investment (OFDI) from emerging markets to other economies. This chapter adds to the current understanding of PRA by examining this issue in emerging markets (EMs) through the model developed here.

Details

Risk Management in Emerging Markets
Type: Book
ISBN: 978-1-78635-451-8

Keywords

Article
Publication date: 1 January 1994

M. Anaam Hashmi

In this study a relationship between the fluctuation of a nation's monetary reserves and political risk is established. A least square regression model is used for the…

Abstract

In this study a relationship between the fluctuation of a nation's monetary reserves and political risk is established. A least square regression model is used for the 1972–87 period and monetary reserves fluctuations of nineteen countries are analyzed. It is concluded that monetary reserves data can be used as a cost efficient proxy for political risk in moderate risk non‐oil exporting countries. Less politically risky countries also exhibit a positive relationship but the results are not statistically significant. This study has special implications for small and medium‐sized corporations. Further, the limitations of this study are discussed.

Details

International Journal of Commerce and Management, vol. 4 no. 1/2
Type: Research Article
ISSN: 1056-9219

Abstract

Details

Shipping Company Strategies
Type: Book
ISBN: 978-0-08-045806-9

Article
Publication date: 1 April 1996

Sandro Formica

The purpose of this paper is to explore the importance of the political risk factor that, according to the literature, seems to excerpt a powerful influence in determining…

1612

Abstract

The purpose of this paper is to explore the importance of the political risk factor that, according to the literature, seems to excerpt a powerful influence in determining foreign direct investment (FDI) decisions by multinational firms. The first part of this paper is based on a thorough review of the literature concerning political risk, its definition, and how it relates to FDI. This part also aims to explore the current trend of academic publications as they relate to political risk and FDI. The second part is more critical in nature and attempts to explain the discrepancies determined by past literature, particularly when depicting the relationship between political risk and FDI. In its third part, this paper shows the importance of global expansion in the hospitality industry and the techniques applied in that sector in order to minimize political risk. The concluding comments, in the last part, are offered together with some recommendations to multinational corporate management.

Details

The Tourist Review, vol. 51 no. 4
Type: Research Article
ISSN: 0251-3102

Keywords

Article
Publication date: 28 September 2020

Izzet Darendeli, T.L. Hill, Tazeeb Rajwani and Yunlin Cheng

This paper aims to explore the ideas that social legitimacy (acceptance by the public within a country) serves as a hedge against political risk and that the perceived…

Abstract

Purpose

This paper aims to explore the ideas that social legitimacy (acceptance by the public within a country) serves as a hedge against political risk and that the perceived social value of Multinational Enterprises (MNEs’) products or services improves firms’ social legitimacy and so resilience to political shock.

Design/methodology/approach

Drawing from a unique data concerning global construction activity and taking advantage of the Arab Spring as an exogenous, political shock, this paper teases out the relative effects of pre-shock experience and product/service emphasis.

Findings

The authors find that construction firms that worked on a higher proportion of socially beneficial projects – such as water infrastructure, transportation and telecommunications – recovered more quickly from political shock than did those that worked on projects primarily for manufacturing interests or the oil industry. The authors also find that deep experience in a country had no bearing on a firm’s ability to recover from political shock.

Originality/value

The findings suggest that market behaviors that enhance social legitimacy also enhance MNEs’ ability to survive in volatile political settings. These insights add to the political risk and nonmarket strategy literatures the idea that market strategies that are attentive to nonmarket strategic goals are an important addition to the toolkit for managing political risk. More specifically, when it comes to surviving political shock, pre-shock emphasis on socially beneficial products seems to create a social legitimacy buffer that enhances resilience more than do deep country experience and associated social and political ties with the political elite.

Details

Multinational Business Review, vol. 29 no. 4
Type: Research Article
ISSN: 1525-383X

Keywords

Article
Publication date: 1 November 1996

Llewellyn D. Howell and Donald Xie

States that foreign investors have clamoured into Asia in the 1990s hoping to tap into the spectacular economic growth, but have often done so without awareness of…

2158

Abstract

States that foreign investors have clamoured into Asia in the 1990s hoping to tap into the spectacular economic growth, but have often done so without awareness of existing or likely future political and social conditions which could affect their investments and business operations. Adds that political risk insurance is available from agencies such as the World Bank’s MIGA or the US government’s OPIC, but projecting needs for such insurance has not been a consistent practice. Reveals that business publications, such as The Economist, and firms such as Business Environment Risk Intelligence, Inc. (BERI), provide regular projections of political risk based on a variety of observed political and social variables. Examines choice of these variables in an Asian context and assesses statistically the forecasting capability of The Economist and BERI models. Finds that the existence of underlying theory makes a positive difference in the ability of the models to forecast correctly and to provide useful advice to foreign investors. Indicates that both models include variables representing conditions that clearly indicate future trouble for investors. Shows that, with some revisions, existing models of political risk can be useful in guiding investment and trade.

Details

Management Decision, vol. 34 no. 9
Type: Research Article
ISSN: 0025-1747

Keywords

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