{"title":"Impact of geopolitical risk on firm financial fragility: International evidence from listed companies","authors":"Hüseyin Kaya , Yasir Küçükşahin , Mücahit Çitil","doi":"10.1016/j.bir.2025.01.004","DOIUrl":null,"url":null,"abstract":"<div><div>In this study, we investigate the impact of geopolitical risks on financial fragility of firms across 40 countries in the period from 1990 to 2022. The Altman Z-Score is used as an indicator of financial fragility, while the Geopolitical Risk Index is employed as a measure of geopolitical risk. The analysis includes firm-specific indicators and macroeconomic factors from a novel panel dataset. We use panel fixed-effect estimation method and employ system GMM for robustness check. We also examine the relationship according to three different income level groups of countries. The results reveal that geopolitical risks significantly increase the financial fragility of firms, and this effect is stronger in upper middle-income countries. Along with macroeconomic environment and firm characteristics, firms’ heightened sensitivity to geopolitical instability emphasizes the essential role of geopolitical stability in maintaining firm financial health.</div></div>","PeriodicalId":46690,"journal":{"name":"Borsa Istanbul Review","volume":"25 2","pages":"Pages 286-295"},"PeriodicalIF":6.3000,"publicationDate":"2025-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Borsa Istanbul Review","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S2214845025000110","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
In this study, we investigate the impact of geopolitical risks on financial fragility of firms across 40 countries in the period from 1990 to 2022. The Altman Z-Score is used as an indicator of financial fragility, while the Geopolitical Risk Index is employed as a measure of geopolitical risk. The analysis includes firm-specific indicators and macroeconomic factors from a novel panel dataset. We use panel fixed-effect estimation method and employ system GMM for robustness check. We also examine the relationship according to three different income level groups of countries. The results reveal that geopolitical risks significantly increase the financial fragility of firms, and this effect is stronger in upper middle-income countries. Along with macroeconomic environment and firm characteristics, firms’ heightened sensitivity to geopolitical instability emphasizes the essential role of geopolitical stability in maintaining firm financial health.
期刊介绍：
Peer Review under the responsibility of Borsa İstanbul Anonim Sirketi. Borsa İstanbul Review provides a scholarly platform for empirical financial studies including but not limited to financial markets and institutions, financial economics, investor behavior, financial centers and market structures, corporate finance, recent economic and financial trends. Micro and macro data applications and comparative studies are welcome. Country coverage includes advanced, emerging and developing economies. In particular, we would like to publish empirical papers with significant policy implications and encourage submissions in the following areas: Research Topics: • Investments and Portfolio Management • Behavioral Finance • Financial Markets and Institutions • Market Microstructure • Islamic Finance • Financial Risk Management • Valuation • Capital Markets Governance • Financial Regulations
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