Africa as an emerging market offers firms from Multinational Corporations (MNCs) significant opportunities to expand and capitalise on the continents economic growth and combined consumer spending. Africa has significantly higher levels of state fragility and political risk in comparison to the rest of the World. Managers of firms looking to enter the African market need to analyse political risk in Africa when the firm risk taking and financial return relationship is considered. The objective of this research study was to establish if there is a relationship between political risk and financial performance of firms in Africa. This study used various financial performance ratios of 406 firms operating in five African countries and numerous country political risk variables to investigate if such a relationship exist over an eight year period. The findings indicate that there is a positive political risk financial return relationship for firms operating in Africa. Firms seem to achieve higher financial performance results in countries with higher overall political risk. This study suggest that African countries need to be analysed on an individual basis when considering political risk and published political risk data should not be used for decision making without deeper understanding and analyses of the country. / Dissertation (MBA)--University of Pretoria, 2012. / Gordon Institute of Business Science (GIBS) / unrestricted

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Yes / Exposure to political corruption and political uncertainty separately demands opposing risk management responses: to reduce cash to minimize expropriation and to increase cash to hedge policy risk. We study how local political corruption and political uncertainty interact in their impact on corporate cash holdings within the United States. We find robust evidence that firms located in states with higher corruption scores react to increases in local political uncertainty by increasing cash holdings more than those in less corrupt settings. This behavior suggests that firms in more corrupt settings find it expedient to raise cash to facilitate influence of officials in the face of local political risk. We find further support for this conclusion by showing that politically engaged firms respond to our measure of political risk by increasing cash and increasing spending on campaign contributions. Our findings point to a potential channel through which different jurisdictions experience the entrenchment and persistence of corruption.

The high level of political risk might enhance the information asymmetry between managers and stakeholders, therefore leading to increased opportunity for earnings management activities, which depress the usefulness of financial information. On the other hand, times of high political uncertainty possibly increase the demand for information among stakeholders, consequently leading to enhanced scrutiny and fewer earnings management activities. By examine 625 firms listed in the United States between 20022016, I make use of a firm-level measurement of political risk to identify the possible impact on earnings quality. I identify that political risk exposure measured on a firm-level is negatively associated with earnings management. Therefore I can conclude that firm-level political risk increases earnings quality. I further show how firm-level political risk better predicts earnings management activities than an aggregated measurement of political risk. Finally, I provide evidence that suggests that accrual-based earnings management is affected by the past level of political risk exposure. Real earnings management activities show no such indications.

This thesis examines the concept of political risk. It explores how political actors determine whether something is politically risky and what implications this judgment holds for policy design. It establishes that calculations of political risk are a day-to-day occurrence in political life, that they uniquely and influentially structure the public policy process, and that political risk analysis is a valid and distinct conceptual framework. Surveying an extensive multidisciplinary literature, the thesis clarifies its definition of political risk and identifies a gap in the existing political science literature concerning the concept. It exposes a hiatus between the political science discipline and political practice in the recognition of political risk calculation as a central aspect of political judgment. Because the theory of political risk is underdeveloped in political science, the thesis pieces together the existing wisdom from other disciplines that might inform a definition of political risk. It then plots a set of hypotheses to assist in constructing a foundational appreciation of what political risk calculation might entail. The thesis tests the resulting hypotheses using empirical research. A survey of 111 Australian political actors is conducted in order to determine how political risk is understood and operationalised in political practice and to ascertain the consequences of political risk for decision making and policy design. Survey results are complemented by a comparative analysis of four policy issues. The case studies selected were the Citizen's Charter and Mad Cow crisis of the British Major Government and the Charter of Social and Fiscal Responsibility and Smart State policies initiated by the Queensland Beattie Government. The comparative analysis of these cases is designed to add rigour to the interview data. It also provides additional information concerning the policy design implications of political risk calculation by relating interview findings to substantive policy problems. Together, this multi-method research demonstrates that political risk provides a fresh analytical perspective on public policy. Political risk analysis describes a unique aspect of political reality and explains in new ways the decision making process underpinning policy design. Political risk analysis also defends political action against claims of irrationality and attacks that suggest that politics is based on sheer cynicism, because it shows that political risk calculation boasts a defensible logic of its own. In fact, the thesis concludes that political risk provides a conceptual tool that begins to unravel some of the 'mystery' of politics that confounds technocratic models of policy analysis. Awareness of political risk calculation re-establishes political decision making as an endeavour where investigation must proceed with an appreciation of the integrated nature of human judgment that utilises both 'rational' and 'extra-rational' capacities to confront uncertainty.

¡@The decision of company¡¦s capital structure should depend on each company¡¦s characteristic and environment for determining the proper debt level. Nowadays, in the global environment, corporation has been affected by the global variables. In addition to the involvement of international activity for corporation, the factor of global environment will also strike the corporation¡¦s characteristic and operating. ¡@This study uses the electronics industry as sample, and the sample period is from 2000 to 2006. This study will be divided into three parts. First, separate global activity into two dimensions: operating and finance, and to build respective measurement indicator of the internationalization. Second, discuss how these two dimensions influencing on the financial characteristic and capital structure for company. Finally, explore whether the international factors of exchange rate risk and political risk will affect the corporation capital structure. ¡@As a result, this study discovers three main conclusions. First, the international activity variables such as operating and financial characteristics actually exist in the electronics industry. Corporation can diversify the operating risk and reduce the cost of bankruptcy through the international activity of operating, however, that also restricts the investment opportunity and reduces the debt¡¦s agency cost at the same time. In addition, we find that the international level of operating will affect corporation¡¦s capital structure significantly. But if we control the variables of capital structure theory such as size, bankruptcy cost, debt¡¦s agency cost and the earning ability, it will become insignificant. However, the international level of finance always has significant and positive effect on corporation¡¦s capital structure no matter do we control the variables of capital structure theory or not. Third, as for the international environment factors, exchange rate risk is significant and positive factor for capital structure, conversely, political risk is significant and negative factor. Finally, this study exhibits that the decision of company¡¦s capital structure should consider the international environment for each company.

This paper studies if a change in political risk has a significant impact on the stock returns of countries. Additionally, the paper assesses if this change in political risk impacts stock returns differently in emerging and developed countries. The paper conducts a risk based portfolio analysis and a linear cross-sectional regression analysis in order to find a conclusive result. The portfolio analysis, which replicates a study carried out by Diamonte, Liew, and Stevens (1996), reveals that there is a difference in the impact that change in political risk has in developed and emerging countries. The regression analysis finds that change in political risk does impact stock returns but there is no statistically significant difference in this impact between emerging and developed countries. The regression analysis also finds that the existing level of risk does not significantly affect the impact that growth in political risk has on stock returns.

This thesis is based on four essays dealing with tourism development and its determinants. Chapter Two explores the different definitions of ‘tourism’ and ‘tourist’, as well as the factors that influence tourism arrivals. We discuss traditional and more recent theories that underlie the study of the tourism industry. The third chapter examines the effect of tourism upon economic growth, investigating the effects of tourism specialization within tourism-exporting countries and non-tourism-exporting countries annually over the period 1995–2007, applying panel-data methods in cross-sectional growth regressions. This study finds that tourism does not affect economic growth in either underdeveloped or developed countries. Moreover, tourism might cause Dutch Disease in tourism-exporting countries owing to their over-reliance on the exporting of non-traded goods. Chapter Four seeks to identify how institutional quality and aspects of infrastructure (internet access measured by size of country or per 100 people) influence tourist arrivals in a whole sample of 131 countries and in sub-samples comprising developed and developing countries (as defined by IMF criteria) using static and dynamic panel data. The findings indicate that internet access enhances the tourism industry, and most interestingly, that good governance is one of the most influential factors for improving and developing tourism. Chapter Five diagnoses the determinants of tourism flows using panel-data sets including 134 originating countries and 31 destination countries (selected depending on data availability) focusing on ICRG data for the period 2005–2009. The methodology makes use of basic and augmented gravity equations, together with the Hausman-Taylor and Poisson estimation techniques, whilst comparing the performance of the three gravity-equation methods. The results suggest that lower levels of political risk contribute to an increase in tourism flows. Furthermore, common language (positively), common currency (negatively) and political factors (particularly institutional quality) are the most prominent determinants in promoting (or deterring) tourism. Chapter Six gives concluding remarks.

Organizational researchers have recently taken an interest in the ways in which social movements, non-governmental organizations (NGOs), and other secondary stakeholders attempt to influence corporate behavior. Scholars, however, have yet to carefully probe the link between secondary stakeholder legal action and target firm stock market performance. This is puzzling given the sharp rise in NGO-initiated civil lawsuits against corporations in recent years for alleged overseas human rights abuses and environmental misconduct. Furthermore, few studies have considered how such lawsuits impact a target firm’s intangible assets, namely its image and reputation. Structured in the form of three essays, this dissertation examined the antecedents and consequences of secondary stakeholder legal activism in both conceptual and empirical settings. Essay One argued that conventional approaches to understanding political risk fail to account for the reputational risks to multinational enterprises (MNEs) posed by transnational networks of human rights NGOs employing litigation-based strategies. It offered a new framework for understanding this emerging challenge to multinational corporate activity. Essay Two empirically tested the relationship between the filing of human rights-related civil lawsuits and corporate stock market performance using an event study methodology and regression analysis. The statistical analysis performed showed that target firms experience a significant decline in share price upon filing and that both industry and nature of the lawsuit are significantly and negatively related to shareholder wealth. Essay Three drew upon social movement and social identity theories to develop and test a set of hypotheses on how secondary stakeholder groups select their targets for human rights-related civil lawsuits. The results of a logistic regression model offered support for the proposition that MNE targets are chosen based on both interest and identity factors. The results of these essays suggest that legal action initiated by secondary stakeholder groups is a new and salient threat to multinational business and that firms doing business in countries with weak political institutions should factor this into corporate planning and take steps to mitigate their exposure to such risks.

South African Multinational Corporations (MNCs) are expanding their operations and seeking investment opportunities elsewhere bedsides South Africa. Some of these opportunities present themselves in unfamiliar environments which are politically risky nonetheless South African MNCs continue to invest in such countries. The aim of this research paper is to establish the impact of political risk on foreign direct investment decisions by South African MNCs. The paper seeks to establish key political risk factors that South African MNCs consider prior to investing in a country deemed politically risky. Once they have indentified these political risk factors, what are the Foreign Direct Investment (FDI) drivers attracting them to a specific country despite its political climate? The paper attempts to understand the decision making process of MNCs when seeking to invest in a politically risky country and to what extent do MNCs involve the incumbent government and other local stakeholders in this process. Lastly the paper seeks to establish how MNCs manage the impact of political risk in a country.A qualitative research methodology with an exploratory design was used to collect the data. In-depth face-to-face interviews were conducted with eight representatives from South African MNCs which are doing business in politically risky countries.The results reveal that political risk has a significant impact on the FDI decision making process of South African MNCs and how they go about conducting this process has a far reaching impact on the success of the MNC in a politically risky country. Conducting a thorough political environment assessment is critical, by engaging the incumbent government and all relevant stakeholders is key when seeking to invest in politically risky countries. Politics drive economics therefore one cannot separate economics and politics. / Dissertation (MBA)--University of Pretoria, 2012. / Gordon Institute of Business Science (GIBS) / unrestricted