TY - JOUR
T1 - Firm-level political risk and corporate investment
AU - Choi, Wonseok
AU - Chung, Chune Young
AU - Wang, Kainan
N1 - Publisher Copyright:
© 2021
PY - 2022/5
Y1 - 2022/5
N2 - Extant literature shows that firms reduce their capital investment in response to political risk. We examine firm-level activities and characteristics that mitigate the impact of political risk on firm investment. First, we empirically investigate the relationship between firm-level political risk and future investment, showing that firms with higher political exposure and political risk spend less on capital investment. Next, we examine the mechanisms behind the negative relationship between firm-level political risk and corporate investment. We find that political lobbying effectively reduces the negative impact of political exposure and political risk on corporate investment. In addition to corroborating the key findings documented in the literature that firms react to political risk by cutting investment, we show that this relationship is affected by certain firm activities and characteristics.
AB - Extant literature shows that firms reduce their capital investment in response to political risk. We examine firm-level activities and characteristics that mitigate the impact of political risk on firm investment. First, we empirically investigate the relationship between firm-level political risk and future investment, showing that firms with higher political exposure and political risk spend less on capital investment. Next, we examine the mechanisms behind the negative relationship between firm-level political risk and corporate investment. We find that political lobbying effectively reduces the negative impact of political exposure and political risk on corporate investment. In addition to corroborating the key findings documented in the literature that firms react to political risk by cutting investment, we show that this relationship is affected by certain firm activities and characteristics.
KW - Firm-level political risk
KW - corporate governance
KW - corporate investment
UR - http://www.scopus.com/inward/record.url?scp=85110471220&partnerID=8YFLogxK
U2 - 10.1016/j.frl.2021.102307
DO - 10.1016/j.frl.2021.102307
M3 - Article
AN - SCOPUS:85110471220
SN - 1544-6123
VL - 46
JO - Finance Research Letters
JF - Finance Research Letters
M1 - 102307
ER -