(iPoster) Exposure to Geopolitical Risks and Corporate Political Activity

• In Event: Poster Session: New Directions in International Political Economy

Abstract

How does rising exposure to geopolitical risks (GPRs) shape firms’ political strategies? While existing work shows that rising geopolitical risks depress economic activity and investment, we know little about their effect on corporate political strategies. I argue that geopolitical risks create uncertainty, and exposed firms have greater incentives to expand their political efforts to shield themselves and secure exemptions before committing capital. To test this argument, I measure firms’ exposure to geopolitical risks by applying automated text analysis methods to a variety of corporate documents, such as earnings-call transcripts and the risk-factor sections of 10-K and 20-F filings. The results show that (i) rising GPR exposure increases firms’ geopolitical lobbying intensity; (ii) while geoeconomic exposure draws entry into geopolitical lobbying, security-based exposure increases the intensity of spending among already active firms; and (iii) the type of geopolitical risk exposure increases lobbying efforts toward the relevant agencies—geoeconomic to trade, security to defense. These findings shed new light on the consequences of rising geopolitical risks for firms’ political behavior.

Author

• Volkan Tibet Gur, Rutgers University, New Brunswick