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Political Risk in Hong Kong and Taiwan: Pricing the China Factor

Author

Listed:
  • Clark, Ephraim

    (Ceram School of Management)

Abstract

This paper measures how the risk associated with foreign direct investment in the prosperous, liberal economies of Hong Kong and Taiwan is affected by the prospect of reunification with the poor, politically and economically back - ward mainland. This China factor is modeled as a jump to a higher political risk level. I find that the China factor effect is substantial on Taiwan but still almost six times higher on Hong Kong. Nevertheless, Hong Kong’s political risk is considerably lower than China’s, thereby confirming the intuition that Hong Kong could be a lower risk back door avenue to the potentially lucrative Chi - nese market.

Suggested Citation

  • Clark, Ephraim, 1998. "Political Risk in Hong Kong and Taiwan: Pricing the China Factor," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 13, pages 276-291.
    • Handle: RePEc:ris:integr:0075
    as

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    References listed on IDEAS

    as
    1. Stephen J Kobrin, 1979. "Political Risk: A Review and Reconsideration," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 10(1), pages 67-80, March.
    2. Ms. Carmen Reinhart & Mr. Mohsin S. Khan, 1995. "Capital Flows in the APEC Region," IMF Occasional Papers 1995/015, International Monetary Fund.
    3. Mr. David Burton & Ms. Wanda S Tseng & Ms. Kalpana Kochhar & Hoe Ee Khor & Mr. Dubravko Mihaljek, 1994. "Economic Reform in China: A New Phase," IMF Occasional Papers 1994/002, International Monetary Fund.
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    Cited by:

    1. Ephraim Clark & Radu Tunaru, 2001. "Emerging Markets: Investing with Political Risk," Multinational Finance Journal, Multinational Finance Journal, vol. 5(3), pages 155-173, September.

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    More about this item

    Keywords

    Political; Risk;

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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