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Geoeconomic fragmentation and firms' financial performance

Author

Listed:
  • Alessandro D'Orazio

    (Sapienza University of Rome, European Central Bank)

  • Fabrizio Ferriani

    (Bank of Italy)

  • Andrea Gazzani

    (Bank of Italy)

Abstract
We introduce a novel firm-level revenue-weighted geopolitical risk index by integrating corporate revenue distribution with geopolitical risk across countries. Our findings reveal a significant real-financial feedback loop: firms with greater exposure to geopolitical risk have an increased probability of default, reduced market valuations and higher financing costs. Notably, the impact of this feedback loop has intensified since 2017, aligning with growing apprehension regarding economic fragmentation in firms' risk assessments.

Suggested Citation

  • Alessandro D'Orazio & Fabrizio Ferriani & Andrea Gazzani, 2024. "Geoeconomic fragmentation and firms' financial performance," Questioni di Economia e Finanza (Occasional Papers) 844, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_844_24
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2024-0844/QEF_844_24.pdf
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    References listed on IDEAS

    as
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    5. Tarek A Hassan & Stephan Hollander & Laurence van Lent & Ahmed Tahoun, 2019. "Firm-Level Political Risk: Measurement and Effects," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(4), pages 2135-2202.
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    Cited by:

    1. Aiyar, Shekhar & Ohnsorge, Franziska, 2024. "Geoeconomic Fragmentation and "Connector" Countries," MPRA Paper 121726, University Library of Munich, Germany.

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    More about this item

    Keywords

    geopolitical risk; fragmentation; financial performance; revenue exposure;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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