The Impact of Geopolitical Risk on Corporate Investment: Evidence from Turkish Firms

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Tan Ö. F., Cavlak H., Cebeci Y., Güneş N.

INDONESIAN CAPITAL MARKET REVIEW, cilt.14, sa.1, ss.16-32, 2022 (ESCI) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 14 Sayı: 1
  • Basım Tarihi: 2022
  • Doi Numarası: 10.21002/icmr.v14i1.1138
  • Dergi Adı: INDONESIAN CAPITAL MARKET REVIEW
  • Derginin Tarandığı İndeksler: Emerging Sources Citation Index (ESCI)
  • Sayfa Sayıları: ss.16-32
  • Anahtar Kelimeler: Geopolitical Risk Index, Corporate Investment, Borsa Istanbul, Financial Constraints, GMM, ECONOMIC-POLICY UNCERTAINTY, CASH FLOW SENSITIVITY, FINANCIAL CONSTRAINTS, COMPANIES EVIDENCE, DETERMINANTS, GMM
  • Marmara Üniversitesi Adresli: Evet

Özet

This study analyzes the effects of geopolitical risk on the corporate investment of 164 Turkish manufacturing firms listed in Borsa Istanbul (BIST). The time covers the period from 2005 to 2019, applying the system Generalized Methods of Moments (GMM) estimator. The results indicate that geopolitical risk hurts corporate investment in Turkey. Under uncertainty induced by geographi-cal risk, firms prefer to decline their investment. Additionally, financially constrained (non-dividend, small, young) firms are more negatively affected than financially unconstrained firms. Our findings are robust under alternative measures of geopolitical risk. Overall, this study reveals that geopolitical risk is a significant uncertainty affecting the investment decisions of manufacturing firms in Turkey.