We study how Spanish equity investors assessed firms’ exposure to political risk during the regime change of the 1930s. We show that shifts in political uncertainty regularly predicted a general deterioration of future investment opportunities in the stock market. However, we also find that firms differed in their sensitivity to uncertainty, reflecting important differences in their perceived exposures to political risk. The negative impact of uncertainty was significantly milder for firms with political connections to republican parties. The price of some stocks increased in periods of heightened uncertainty, thus allowing investors to hedge against reinvestment risk. In the case of firms that became targets of hostile political actions, we observe that investors frequently adjusted their assessment of individual stocks to changes in firm-specific political circumstances. Over the whole period of the Second Republic, investors' systematic preference for safer equity hedges led to a continuous decline in the price of stocks perceived as more exposed to political risk.

Marine war risk insurance fundamentally contemplates casualties caused by international conflict. Curiously, however, standard clauses also exclude cover and automatically terminate war risk policies in the event of an outbreak of war between a select group of historically powerful States: China, France, the United Kingdom, the United States and Russia. This article aims to demystify the origins of this five-powers clause and evaluate its prospective application through the lens of an emerging breed of confrontation among the world's major powers.

Under what conditions do countries lose their status as the leading global financial center? Some scholars argue that such shifts follow shortly after transitions in the distribution of other key capabilities (e.g. GDP), while others argue that path dependence or other more bespoke capabilities might be able to sustain financial leadership long after decline in other capabilities. This paper aims to understand the causes of the Anglo-American financial transition. I argue that the ability to manage political risk for investors is critical to the position of countries as financial entrepôts. In the case of British financial leadership, I argue that Britain’s position as an entrepôt hinged on its power projection capability, which enabled Britain to limit political risk for investors in ways that other states could not replicate. The gradual loss of those capabilities, in turn, saw Britain eventually become overshadowed by the United States. I support my claims with a TERGM analysis of the interwar sovereign debt network.

Whereas emerging market firms (EMFs) face severe legitimacy barriers when entering global markets, whether and under what conditions green innovation can help them gain legitimacy remains under-examined. This article argues that green innovation can help EMFs obtain regulatory and social legitimacy in host countries and consequently boost their exports. Based on a panel dataset populated by 254 Chinese-listed manufacturing companies from 2011 through 2017, this article finds that green innovation is positively associated with EMF export performance. Moreover, this positive relationship is stronger when host-country political risk is lower or host-country buyer sophistication is higher but becomes weaker for state-owned EMFs. These findings enrich the legitimacy-based view and international business literature by identifying the role of green innovation in boosting EMF export performance and specifying important institutional contingencies.

The established literature has recognized revolving-door hiring as a means for firms to obtain protection against political risks and advance their business interests. This article theorizes about the cost of the revolving door between politics and business, which transmits uncertainty during turbulent times from the political system to firms. I empirically estimate the cost of revolving-door recruitment for over 3,000 publicly listed firms in the early years of a major corruption crackdown in China. I show that firm-level returns on revolving-door recruitment became negative during this period. In contrast to conventional corporate governance explanations, the mechanism proposed in this article emphasizes the external perceptions and financing of firms. Text analyses of over 1 million equity reports and bank-loan record data show that political connections act as a negative signal to external financiers, thereby discouraging external financing.

What effect does political instability in the form of a potential secession from a political union have on business formation? Using newly collected data on business creation, we show that entrepreneurial activity in Ireland in the late nineteenth century was much lower than Scotland, and this divergence fluctuated over time. Several factors may have contributed to this, but we argue that political uncertainty about the prospect of a devolved government in Ireland played a role. The effects were most acute in the North of Ireland, the region that was most concerned by potential changes.

Which factors make some American multinational corporations (MNCs) take political action in response to the US–China Trade War and cause others to stay on the sidelines? We identify China-based subsidiaries of US firms to identify firms’ political actions in response to the trade war. We combine data on firms’ tariff exposure, economic actions in China, and political actions in the United States during the trade war. Together these data highlight the divergent strategies with which firms engage. Even though more than 63 percent of MNCs in our sample were adversely impacted by tariffs, only 22 percent voice opposition and 7 percent exit in response to the trade war. Our analysis reveals that US MNCs in China differ in their business models, ownership structure, experience in China, and size of capital investments. These firm-level factors determine the degree to which US MNCs are embedded in China. This in turn shapes how firms perceive political risk and choose from the menu of options to deal with the trade war. Size and age increase voice while joint-venture status decreases it.

We study the impact of democratic transitions on institutional outcomes. Using an event study method and a sample of 135 countries over the period 1984–2016, we observe that democratic transitions improve institutional outcomes. The effect appears within 3 years after the transition year. The results are robust to alternative definitions of transitions, alternative codings of pre- and post-transition years, and changing the set of control variables. We also find that both full and partial democratizations improve institutional outcomes. Transitions out of military regimes or communist autocracies do not. The effect of democratization depends on GDP per capita, education, and the regularity of the transition. Finally, the evidence suggests that the effect is particularly clear on the corruption, law and order, and military in politics dimensions of the index.

Led by German-born Carl Laemmle, Universal Pictures devoted itself to winning over the German market in the interwar period. Yet the German market proved difficult to crack, owing to political risk and cultural distance. We argue that cultural differences kept most American films from becoming more successful, even those that were shown in German theaters and prior to the advent of sound film. Universal Pictures resorted to a film strategy of localization using German actors and directors, which proved a winning formula just as the Nazis came to power.

This article examines the strategies employed by multinational banks to mitigate political risk following the onset of revolution in their host countries during the early twentieth century. It does so by exploring the activities of multinational banks in China during the Revolution of 1911 and its aftermath. This article first describes the measures that multinational banks took to maintain China's credit on foreign bond markets after the outbreak of revolution. It then examines how these bankers curtailed political instability by first withdrawing financial support from both the Qing government and the revolutionaries and then providing financial assistance to the new Chinese Republican government.

Multinational enterprises faced new political risks after World War II in the context of decolonization and the Cold War. The risks were particularly high in Asia between 1945 and 1970. Although the relevant literature has focused essentially on organizational innovation and strategic choices in explaining how firms dealt with these new political risks, this article explores the informal roles that governments of small, neutral countries played in supporting their multinationals abroad. Looking at the case of Nestlé in Asia, the article argues that the backing of the Swiss federal authorities was crucial for the company to overcome various kinds of risks and ensure a long-term presence in the region.

How do domestic and global factors shape governments’ capacity to issue debt in primary capital markets? Consistent with the ‘democratic advantage’, we identify domestic institutional mechanisms, including executive constraints and policy transparency, that facilitate debt issuance rather than electoral events. Most importantly, we argue that the democratic advantage is contingent: investors’ attention to domestic politics varies with conditions in global capital markets. When global financial liquidity is low, investors are risk-averse, and political risk constrains governments’ capacity to borrow. But when global markets are flush, investors are risk-tolerant and less sensitive to political risk. We support our argument with new data on 245,000 government bond issues in primary capital markets – the point at which governments’ costs of market access matter most – for 131 sovereign issuers (1990–2016). In doing so, we highlight the role of systemic factors, which are under-appreciated in much ‘open economy politics’ research, in determining access to capital markets.