Description:
We examine the impact of geopolitical risk (GPR) on firm value, focusing on non-financial firms from 17 emerging market countries. The evidence presents that heightening GPR is associated with a reduction in firm value. The reason is that firms tend to reduce internal risk by holding more cash, deleveraging, and postponing investment during high external uncertainty, and these actions decrease firm value. Furthermore, the impact of GPR is as potent as other global political risks. Its adverse effect on firm value declines when firms operate in an environment with stable politics, robust socioeconomic, and law implementation effectiveness