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Geopolitical risk and firms informal financing: International evidence

Tracks
Jade 1
Monday, July 1, 2024
3:55 PM - 4:20 PM

Presenter

Mr Muhammad Saleem
Phd Student
University of Wollongong Australia

Geopolitical risk and firms informal financing: International evidence

Abstract

We investigate the impact of geopolitical risk (GPR) on firm’s informal financing decisions in international context. Drawing on substitution hypothesis and economic model of trade credit, our results show that firm’s access to informal financing (FAIF) increases, and firm’s supply of informal financing (FSIF) reduces during heightened GPR. Furthermore, firms are net receiver of informal financing amidst heightened GPR. Our results remain robust by using alternative proxies of GPR and informal financing and also control the various other external uncertainties to disentangle the GPR effect from them. In our additional analysis, we find that firm’s financing frictions, goods’ nature, relationship-specific investments (RSIs), inflation, financial credit and legal efficiency play a significant role in FAIF, and FSIF during rising GPR. However, firm as net receiver during heightened GPR remains independent of firm and country level characteristics. The findings offer insights and implications for corporate managers, investors and creditors.

Biography

Muhammad Saleem is a dedicated and accomplished PhD student studying finance at the University of Wollongong, where he holds a fully-funded scholarship. He has completed one year of his PhD coursework comprising 4 subjects with 2 x High Distinctions and 2 x Distinctions. Before embarking on his PhD journey, he served as a lecturer at a public sector university in Pakistan, where he gained valuable experience teaching and supervising research students. During his time there, he authored five research publications, showcasing his strong research potential. His passion for research and teaching led him to pursue a PhD in finance. His research interests lie in the fields of corporate finance, corporate governance, and CSR/ESG, where he strives to contribute new knowledge and insights. With his teaching experience and strong research background, he is well-positioned to make significant contributions to the field of finance. He is dedicated to advancing knowledge in corporate finance, corporate governance, and CSR/ESG, and to using his research to create positive change in the world.

Chair

Steven Cahan
Professor
University of Auckland


Discussant

Hang Wang
Lecturer
Jinan University

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