TY - JOUR
T1 - Political risk and the cost of capital in the MENA region
AU - Belkhir, Mohamed
AU - Boubakri, Narjess
AU - Grira, Jocelyn
N1 - Publisher Copyright:
© 2017
PY - 2017/12
Y1 - 2017/12
N2 - We examine the impact of political risk in the MENA region on the cost at which firms can raise capital. Using the implied cost of equity as a measure of the cost of capital and ICRG's political risk rating as a proxy for political risk, we find that political risk results in a higher cost of capital. Economically, our results suggest that a one standard deviation increase in the political risk index is associated with a 450 basis points increase in the cost of equity capital of MENA firms. Our results are consistent across a battery of robustness checks. Our findings have important policy implications that are relevant to the MENA region and beyond.
AB - We examine the impact of political risk in the MENA region on the cost at which firms can raise capital. Using the implied cost of equity as a measure of the cost of capital and ICRG's political risk rating as a proxy for political risk, we find that political risk results in a higher cost of capital. Economically, our results suggest that a one standard deviation increase in the political risk index is associated with a 450 basis points increase in the cost of equity capital of MENA firms. Our results are consistent across a battery of robustness checks. Our findings have important policy implications that are relevant to the MENA region and beyond.
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U2 - 10.1016/j.ememar.2017.08.002
DO - 10.1016/j.ememar.2017.08.002
M3 - Article
AN - SCOPUS:85029564189
SN - 1566-0141
VL - 33
SP - 155
EP - 172
JO - Emerging Markets Review
JF - Emerging Markets Review
ER -