Cross-Border Transmission of Geopolitical Uncertainty
14 Pages Posted: 19 Jun 2019
Date Written: June 9, 2019
Using unexpected changes in geopolitical tension on the Korean peninsula as a quasi-natural experimental setting, we document the international transmission of geopolitical uncertainty. We find that U.S. firms that are more sensitive to Korean political uncertainty exhibit significant price responses in the short time window around a significant geopolitical event in Korea. The effects are more pronounced for U.S. multinationals, which are more sensitive to geopolitical risks stemming from outside the U.S.
Keywords: geopolitical risk, event study, firm value, news-based uncertainty measure, international transmission, multinational corporations
JEL Classification: G14, G15, G18
Suggested Citation: Suggested Citation