TY - JOUR
T1 - Impact of geopolitical risk on target debt ratio
AU - Shrestha, Keshab
AU - Philip, Sheena Sara Suresh
AU - Khaw, Karren Lee-Hwei
N1 - Publisher Copyright:
© 2023 The Author(s)
PY - 2024/2
Y1 - 2024/2
N2 - Geopolitical risks (GPR) expose firms to uncertainties that can affect business operations, corporate decisions, and outcomes. We hypothesize that higher GPR is associated with a lower firm's target debt ratio (TDR) because a higher GPR increases the probability of default. Consistent with our hypothesis, we find a significant negative association between GPR and TDR. Additionally, we observe a significant negative association between GPR and distance-to-default score, supporting our view that higher GPR is linked to a greater probability of default. Further heterogeneity analysis indicates that high-tech firms are more vulnerable to the adverse impact of GPR than low-tech firms.
AB - Geopolitical risks (GPR) expose firms to uncertainties that can affect business operations, corporate decisions, and outcomes. We hypothesize that higher GPR is associated with a lower firm's target debt ratio (TDR) because a higher GPR increases the probability of default. Consistent with our hypothesis, we find a significant negative association between GPR and TDR. Additionally, we observe a significant negative association between GPR and distance-to-default score, supporting our view that higher GPR is linked to a greater probability of default. Further heterogeneity analysis indicates that high-tech firms are more vulnerable to the adverse impact of GPR than low-tech firms.
KW - Distance-to-default
KW - Geopolitical risk
KW - High-tech firms
KW - Target debt ratio
UR - http://www.scopus.com/inward/record.url?scp=85184677288&partnerID=8YFLogxK
U2 - 10.1016/j.frl.2023.104964
DO - 10.1016/j.frl.2023.104964
M3 - Article
AN - SCOPUS:85184677288
SN - 1544-6123
VL - 60
JO - Finance Research Letters
JF - Finance Research Letters
M1 - 104964
ER -
