Abstract
This thesis emphasizes the role of political risk in international business
by analyzing the impact of political events on the valuation of firms. The
guiding question is how governments interfere with the business interests of
firms located in their own country as well as with the business interests of
firms from other nations, as a consequence of the application of international
sanctions. Therefore, the focus is on multi-country and multi-sector effects due
to the occurrence of specific sanction events. The empirical methodology is the
event-study approach, which analyzes stock market reactions to new information.
The research objective is to detect abnormal stock returns across multiple
markets and sectors, as a consequence of events related to the imposition of or
threat of international sanctions. The empirical model of this thesis differentiates
between risk-effects for firms located in the sender country (i.e., the origin of
sanctions), for firms located in or specifically related to target countries (i.e.,
the receiver of sanctions) and firms located in third countries (i.e., countries
not directly involved). There are three different cases analyzed: E.U. Economic
Sanctions against African countries (2002-2005), the U.S. Steel Tariff (2002) and
the Iran Sanctions Act (2007). The cases represent sanctions applied on the
nationwide, sector- and firm-specific level. The event studies provide empirical
evidence for the existence of political risk-effects due to sector-specific sanctions.
Risk-effects are detected for firms in target countries and for firms in the sender
country itself. The applied political risk framework describes how political risk
affects multinational firm value and explains that it varies among firms. The
impact of political risk on a firm's value depends on the risk exposure of a firm's
individual business interests to it. This contributes a new perspective on political
risk that emphasizes multinational and multi-sectoral effects and underlines that a
specific political risk can be relevant for a variety of different international business
interests. (author's abstract)
by analyzing the impact of political events on the valuation of firms. The
guiding question is how governments interfere with the business interests of
firms located in their own country as well as with the business interests of
firms from other nations, as a consequence of the application of international
sanctions. Therefore, the focus is on multi-country and multi-sector effects due
to the occurrence of specific sanction events. The empirical methodology is the
event-study approach, which analyzes stock market reactions to new information.
The research objective is to detect abnormal stock returns across multiple
markets and sectors, as a consequence of events related to the imposition of or
threat of international sanctions. The empirical model of this thesis differentiates
between risk-effects for firms located in the sender country (i.e., the origin of
sanctions), for firms located in or specifically related to target countries (i.e.,
the receiver of sanctions) and firms located in third countries (i.e., countries
not directly involved). There are three different cases analyzed: E.U. Economic
Sanctions against African countries (2002-2005), the U.S. Steel Tariff (2002) and
the Iran Sanctions Act (2007). The cases represent sanctions applied on the
nationwide, sector- and firm-specific level. The event studies provide empirical
evidence for the existence of political risk-effects due to sector-specific sanctions.
Risk-effects are detected for firms in target countries and for firms in the sender
country itself. The applied political risk framework describes how political risk
affects multinational firm value and explains that it varies among firms. The
impact of political risk on a firm's value depends on the risk exposure of a firm's
individual business interests to it. This contributes a new perspective on political
risk that emphasizes multinational and multi-sectoral effects and underlines that a
specific political risk can be relevant for a variety of different international business
interests. (author's abstract)
| Original language | English |
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| Awarding Institution |
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| DOIs | |
| Publication status | Published - 1 May 2011 |