The Real-Financial Feedback Loop: Geoeconomic Fragmentation and Firms' Performance
Monday, 18 March 2024, 00:03
Understanding Geoeconomic Fragmentation
The threats of geoeconomic fragmentation have accelerated in recent years. This column introduces a novel firm-level revenue-weighted geopolitical risk index by integrating corporate revenue distribution with geopolitical risk across countries.
Real-Financial Feedback Loop
- Firms with greater exposure to geopolitical risk experience increased probability of default
- Reduced market valuations are observed
- Higher financing costs are incurred
Intensified Impact since 2017
- The feedback loop has intensified since 2017
- Rising apprehension regarding economic fragmentation in firms’ risk assessments
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.