Political uncertainty and cross-border equity allocation decisions: international evidence
Kwabi, Frank; Boateng, Agyenim; Wonu, Chizindu; Kariuki, Charles; Du, Anna
Dr Anna Du A.Du@napier.ac.uk
Political risk models highlight that political uncertainty matters for corporate investment decisions. However, how political uncertainty matters for investment allocation decisions is relatively under-explored. In this study, we examine the impact of political uncertainty associated with national elections on foreign equity portfolio in 48 countries. Our results indicate that political uncertainty reduces international equity allocations to the host country and such reduction appears more pronounced in the election year. Further analysis shows that the interaction between political uncertainty and institutional quality has a positive and significant effect on international equity portfolio flow, suggesting that the value of institutional quality outweighs the negative effects of political uncertainty. Lastly, we find equity home bias to be negative and significant; however, the interaction between political uncertainty and equity home bias appears insignificant.
Kwabi, F., Boateng, A., Wonu, C., Kariuki, C., & Du, A. (2023). Political uncertainty and cross-border equity allocation decisions: international evidence. International Review of Financial Analysis, 87, Article 102562. https://doi.org/10.1016/j.irfa.2023.102562
|Journal Article Type||Article|
|Acceptance Date||Feb 1, 2023|
|Online Publication Date||Feb 4, 2023|
|Deposit Date||Feb 4, 2023|
|Publicly Available Date||Aug 5, 2024|
|Peer Reviewed||Peer Reviewed|
|Keywords||Political uncertainty, Election uncertainty, Foreign equity portfolio flow, Institutional quality|
This file is under embargo until Aug 5, 2024 due to copyright reasons.
Contact firstname.lastname@example.org to request a copy for personal use.
You might also like
SMEs respond to climate change: Evidence from developing countries
The Impact of Inclusive Finance on Carbon Dioxide Emissions: Evidence from China's Provincial Regions
Presentation / Conference