IMPACT OF ECONOMIC, FINANCIAL AND POLITICAL RISKS ON TOURISM PERFORMANCE: A CASE OF SOUTH AFRICA

The contribution of tourism to a country’s economy is determined by country risk measures such as economic, financial and political risk. This study aimed to investigate short and long-run effects of country risk factors on international tourist arrivals and tourism revenue for the South African tourism industry. The sample period consists of monthly time series data of tourist arrivals, tourism revenue, and country risk factors from January 2004 to December 2018. Data was analysed using the Autoregressive distributed lag (ARDL) and non-linear ARDL (NARDL) models. The findings showed that the long-run effects of country risk factors on tourist arrivals and revenue are asymmetric. Economic, financial, and political measures of country risk negatively affect tourist arrivals, however, tourism revenue responds differently to changes in these risk factors. Political risk has the highest effect on the tourism industry compared to economic and financial risk factors. Overall, this study established that both international tourist arrivals and tourism revenue are threatened by financial shocks indicating that an unconducive financial environment has long-term negative implications on the South African tourism industry.

Social Dimensions of Political Risk – SDPR: Concept and Index for Risk Impact on Society

Political risk concerns the profits and investment plans of international business (MNCs, FDI). The Social Dimensions of Political Risk – SDPR is an unchartered territory of political risk. Consequently, on the basis of the analysis of theories of risk, political risk, systems, values and globalization the concept for SDPR is generated. This concept is based on basic assumptions: 1) society is a system whose elements are subsystems; 2) the societal subsystem is at the core of society; 3) the relation between societal subsystem and society is such as the relation element – system; 4) political risk is systemic; 5) values are axial to the system, and their carrier is the societal subsystem; 6) laws are an artificial construct that has only a value function, but is not a value; 7) the incommensurability between values and the above mentioned artificial construct generates SDPRs that are relevant to the risk for society. A formal theoretical and analytical model of SDPR and a value triangle and conceptual index of SDPR based on it are introduced. Key conclusions pertain to the following: the need for reconsider the paradigm of democracy; greater participation of the societal subsystem; need for subsystems’ mutual restraint based on the principle of authorities’ restraint.

Capital budgeting practices and political risk: evidence from Lebanon

Purpose This paper aims to examine how capital investment projects are appraised in Lebanon; whether the risk is incorporated into this process by Lebanese firms and the impact of political risk on the capital budgeting process. Design/methodology/approach This paper uses a questionnaire survey to investigate the capital budgeting practices of companies located in Lebanon, which is a country characterised by a high level of political risk. Findings Lebanese companies tend to use more than one method of investment appraisal and, increasingly, they are using sophisticated discounted cashflow techniques alongside the payback period. The most widely used methods to evaluate risk include scenario and sensitivity analysis. Finally, political risk plays an important role in the capital budgeting processes of Lebanese companies. Originality/value The paper reports on whether the methods of capital investment appraisal used throughout advanced Western economies are used in the context of an emerging economy. In addition, Lebanon is an ideal research site to study capital budgeting as the conflicts in the country of the past 50 years have required sizeable new expenditure on capital projects; the country is characterised by high levels of political risk which may lead corporate managers to use different approaches to investment appraisal and it provides an opportunity to study capital budgeting decisions by private, unlisted firms.