country risk
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Kybernetes ◽  
2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abroon Qazi ◽  
Mecit Can Emre Simsekler ◽  
Steven Formaneck

PurposeThis paper aims to assess the impact of different drivers of country risk, including business environment, corruption, economic, environmental, financial, health and safety and political risks, on the country-level logistics performance.Design/methodology/approachThis study utilizes three datasets published by reputed international organizations, including the World Bank Group, AM Best and Global Risk Profile, to explore interactions among country risk drivers and the Logistics Performance Index (LPI) in a network setting. The LPI, published by the World Bank Group, is a composite measure of the country-level logistics performance. Using the three datasets, a Bayesian Belief Network (BBN) model is developed to investigate the relative importance of country risk drivers that influence logistics performance.FindingsThe results indicate a moderate to a strong correlation among individual risks and between individual risks and the LPI score. The financial risk significantly varies relative to the extreme states of the LPI score, whereas corruption risk and political risk are the most critical factors influencing the LPI score relative to their resilience and vulnerability potential, respectively.Originality/valueThis study has made two unique contributions to the literature on logistics performance assessment. First, to the best of the authors’ knowledge, this is the first study to establish associations between country risk drivers and country-level logistics performance in a probabilistic network setting. Second, a new BBN-based process has been proposed for logistics performance assessment and operationalized to help researchers and practitioners establish the relative importance of risk drivers influencing logistics performance. The key feature of the proposed process is adapting the BBN methodology to logistics performance assessment through the lens of risk analysis.


2021 ◽  
Vol 38 (4) ◽  
pp. 1309-1316
Author(s):  
Paul-Francois MUZINDUTSI ◽  
◽  
Fikile DUBE ◽  
Jean-Claude MANALIYO ◽  
◽  
...  

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.


2021 ◽  
Vol 8 (4) ◽  
pp. 610-627
Author(s):  
Daniel Francois Meyer

nvestors assess the environment and the level of risk before they invest in a specific region or country. Several country risk indexes have been developed since the beginning of the 1990s, using risk factors such as politics, the economy and sovereign risk factors. This study aims to determine the relationships between the country risk index, economic performance and good governance. The study implemented a quantitative research methodology with panel data, focusing on the four Visegrad countries, using time-series data from 1996 to 2019. The results indicate both long- and short-run relationships. Both GDP and good governance significantly impact the country risk index with coefficients of between 0.17 to 0.31 and 0.02 to 0.15 according to different estimation models. The Granger causality results indicated that both GDP and good governance cause changes in the country risk indexes of the countries, and good governance causes increased economic performance. In conclusion, the study showed clear evidence that a lower country risk index is important to attract investment and sustained economic growth and good governance is critical in this process.          


2021 ◽  
Vol 11 (4) ◽  
pp. 1-52
Author(s):  
Florencia Roca

Learning outcomes This case can be used to help students achieve the following objectives: To project financial statements and assemble different pieces of financial information to create a valuation model (objective #1, create), To calculate a value for Arcor shares, supporting the estimated value with the chosen assumptions and methodologies (objective #2, evaluate), To draw connections between four different approaches to valuation (DCF, EVA, RV and VI), contrasting them and weighting their advantages and limitations (objective #3, analyze), To examine the relationship between forecasted financial statements and valuation (objective #3, analyze), To discuss the calculation of the Weighted Average Cost of Capital in a new situation as is an emerging economy, with the corresponding country-risk adjustment (objective #4, apply), To discuss the sources of value creation in a family-owned private company in a developing economy (objective #4, apply), To understand the dilemma that the head of a company was facing, identifying the three possible financing alternatives discussed in the text as follows: corporate bonds, earnings reinvestment and an IPO (objective #5, understand). To recall basic facts, as the main character’s opinion on the direction of the local economy or the fact that Arcor already complies with the information requirements of a public company (objective #7, remember). Case overview/synopsis This case is based on the valuation of the world’s largest candy maker, Arcor S.A.I.C., originally a Latin American company, which remains a private family business. The key problem presented by the case is the use of different valuation approaches to price Arcor shares, in view of a possible Initial Public Offer. The case illustrates the application of four main valuation approaches as follows: Discounted Cash Flow (DCF), Economic Value Added (EVA), Relative Valuation (RV) and Value Investing (VI). Additionally, it includes a fundamental analysis of eight years of historical financial information and the preparation of forecasted financial statements. Set in a developing economy, the Arcor case introduces the complexities of calculating the cost of capital with the inclusion of country risk, as well as the financial analysis distortions caused by an environment of high inflation. Complexity academic level The Arcor case is appropriate to be used in graduate courses of Corporate Finance, Valuation or Private Equity. Supplementary materials Teaching notes are available for educators only. Subject code CSS 1: Accounting and Finance.


2021 ◽  
Vol 28 (6) ◽  
pp. 30-42
Author(s):  
K. L. Polyakov ◽  
M. V. Polyakova ◽  
M. I. Vasilevskiy

The ability to attract foreign direct investment (FDI) is a critical success factor for the development of any participant in the local market. One of the indicators that characterize the investment attractiveness is the economic value added (EVA). It reflects the market assessment of the company's profit potential. Some EVA assessment methodologies include the country risk assessment – a factor that is beyond control. This study analyzes the impact of this indicator on the investment attractiveness of an organization. The authors estimated the economic value added for some of the largest Russian companies using methodologies that take into account the country's risk level, as well as those methodologies that do not take it into account. The calculations used adjustments for EVA in line with specific features of Russian accounting. As a result, it was revealed that, regardless of industry affiliation, the investment attractiveness of Russian organizations decreases when the country's risk factor is included in its assessment.The article justifies the relevance of the developed approach to the assessment of investment attractiveness of companies based on country risk level as a factor that impacts the ability of organizations to generate profit, making it possible to detect hidden management problems. According to the authors, the application of this approach not only contributes to the solution of long-term and medium-term tasks of business development (for example, the creation of its infrastructure) but also greatly facilitates the entry of organizations into international markets.One of the authors' conclusions of the study is that using the methodological tools developed by them for analytical purposes requires improving the management of the investment attractiveness of an organization and, consequently, its objective assessment. The structure of economic value added can serve as a basis for making management decisions related to increasing investment attractiveness. According to the authors, the provisions formulated in the article can serve as a methodological guide for organizing business valuation based on the EVA in the Russian context. Results of the study can be of interest to managers, current owners of companies, and potential investors.


2021 ◽  
Author(s):  
Tarek Alexander Hassan ◽  
Jesse Schreger ◽  
Markus Schwedeler ◽  
Ahmed Tahoun
Keyword(s):  

2021 ◽  
Vol 27 (10) ◽  
pp. 2172-2196
Author(s):  
Oleg N. SALMANOV

Subject. This paper examines how to determine the cost of equity for a developing economy, if the latter is segmented from the leading developed economy of the world. Objectives. The aim is to establish the importance of determining the cost of equity in the Russian economy, depending on the country of the developed market. Methods. All well-known international methods for determining the cost of equity, taking into account the country risk, are involved in the analysis. For calculations, I use yields of the world’s important market indices. Results. The study shows that the value of equity capital (subject to country risk), which is established under all international methods for the reference market of European developed countries, will be lower. Conclusions. CAPM models, used for developed markets, produce too low cost of capital, when they are applied as-is to developing countries. Therefore, for developing countries, models are used, which rest on the idea of adding a country risk premium to the risk premium, for the reference market of a developed country. This theory does not regulate the choice of a reference market from among developed countries. However, some studies found that the US market is not the most influential for the Russian market. The paper states that the choice of European developed countries provides a 16.8% reduction in the cost of equity, which, in turn, provides an increase in company value by a third.


2021 ◽  
Vol 14 (10) ◽  
pp. 482
Author(s):  
Pavel Jeutang ◽  
Kwabena Kesse

This paper proposes a novel measure of political risk that confirms some of the findings documented in the Foreign Direct Investments (FDI) literature. Particularly, we confirm the positive relationship between political stability and its components on FDI inflows, and the moderating effect of natural resources on this relationship. The proposed political risk measure contains relevant, unique and incremental information not observed in the literature. For example, although this measure is highly correlated with the political risk rating of the International Country Risk Guide (ICRG), it contains unique information that explains FDI inflows beyond what is explained by the ICRG rating. A link to the database for our political risk rating for 150 countries covering 2000 to 2015 has been provided.


2021 ◽  
Vol 13 (2) ◽  
pp. 317-344
Author(s):  
Zocimo Campos ◽  
Juan Tapia Gertosio ◽  
Paulina Gudaris

Currently there is no agreed method to estimate the Risk Premium accurately, therefore, different authors arrive at significantly different results when calculating the risk premium for a given country or industry. This work estimates the risk premium of the Chilean stock market (PRM) for the period 1993-2020 using different estimation methodologies (Differential Returns, Implicit Return in Current Stock Prices). The results indicate, depending on the methodology used, a Premium for Risk that ranges between 1,91% and 10,28%, which shows the existence of a positive premium for assuming risk in Chile that ranges around 5,3%.


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