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A Novel Measure of Political Risk and Foreign Direct Investment Inflows

Author

Listed:
  • Pavel Jeutang

    (College of Business Administration, University of Nebraska at Omaha, Omaha, NE 68182, USA)

  • Kwabena Kesse

    (The Business School, University of Colorado Denver, Denver, CO 80204, USA)

Abstract

This paper proposes a novel measure of political risk that confirms some of the findings documented in the Foreign Direct Investments (FDI) literature. Particularly, we confirm the positive relationship between political stability and its components on FDI inflows, and the moderating effect of natural resources on this relationship. The proposed political risk measure contains relevant, unique and incremental information not observed in the literature. For example, although this measure is highly correlated with the political risk rating of the International Country Risk Guide (ICRG), it contains unique information that explains FDI inflows beyond what is explained by the ICRG rating. A link to the database for our political risk rating for 150 countries covering 2000 to 2015 has been provided.

Suggested Citation

  • Pavel Jeutang & Kwabena Kesse, 2021. "A Novel Measure of Political Risk and Foreign Direct Investment Inflows," JRFM, MDPI, vol. 14(10), pages 1-23, October.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:10:p:482-:d:654497
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    References listed on IDEAS

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    Cited by:

    1. Eman Elish, 2022. "Political and productive capacity characteristics as outward foreign direct investment push factors from BRICS countries," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-10, December.

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