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Geopolitical risk and corporate investment in the metals and mining industry: Evidence from Australia by Lawren J. Rumokoy; Akihiro Omura; Eduardo Roca is a Economics, Econometrics and Finance article available to read on EtoBox.

What is Geopolitical risk and corporate investment in the metals and mining industry: Evidence from Australia about?

This paper examines how geopolitical risk (GPR) impacts corporate investment in the Australian metals and mining industry. We find a strong negative association between GPR and capital expenditures. Consistent with real options theory, firms are more likely to postpone investments during periods of adverse geopolitical events. The detriment of GPR is stronger on investments in ASX 200 metals and mining firms. Our findings further reveal a positive relation between GPR and stock returns, indicating the ability of investors to generate returns from the elevated market uncertainty that inflates the commodity price. The main results are robust in respect to alternative specifications and various estimation methods. In an era of increasing geopolitical tensions, competition for resources, and intense political polarization, this study provides timely insights into the dampening effect of GPR on capital investments in metals and mining companies.

Who reads Geopolitical risk and corporate investment in the metals and mining industry: Evidence from Australia?

Author

Lawren J. Rumokoy; Akihiro Omura; Eduardo Roca

Publisher

Elsevier BV

Published

2023

Language

EN

Field

Economics, Econometrics and Finance (Social Sciences)