Political risk and corporate investment decisions

Abstract

This paper analyzes the different definitions and expressions of political risk and proposes a broad and more inclusive definition regarding its origins and effects. Regarding the effects of political risk on corporate investment decisions, this paper shows the multitude of ways by which the different expressions of political risk may influence both positively and negatively the value of investment opportunities and the decisions of firms to invest. Finally, it proposes different lines of research addressing some of the weaknesses identified in the existing literature ; Correia acknowledges research support from Ministerio de Ciencia e Innovación (Proyecto - MCI ECO2009-12551)