Geopolitical risk and investment-cash flow sensitivity: An empirical analysis for Indian business group-affiliated firms and non-business group affiliated firms

•Geopolitical risk increases investment–cash flow sensitivity.•Geopolitical Threats and Acts have severe effect on investment–cash flow sensitivity.•Impact of Geopolitical risk on investment–cash flow sensitivity is less (greater) for business group-affiliated (independent) firms.•Geopolitical risk...

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Bibliographic Details
Published in:Finance research letters 2023-12, Vol.58, p.104574, Article 104574
Main Author: Gupta, Dr. Gaurav
Format: Article
Language:English
Subjects:
business groups
corporate investment
Geopolitical risk
investment-cash flow sensitivity
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Summary:•Geopolitical risk increases investment–cash flow sensitivity.•Geopolitical Threats and Acts have severe effect on investment–cash flow sensitivity.•Impact of Geopolitical risk on investment–cash flow sensitivity is less (greater) for business group-affiliated (independent) firms.•Geopolitical risk increases financial constraints. This study empirically examines the effect of GPR (geopolitical risk) on investment–cash flow sensitivity of Indian business group-affiliated firms and non-business group-affiliated (independent) firms. This study finds that GPR increases investment–cash flow sensitivity. Further, this study reveals that the impact of GPR on investment–cash flow sensitivity is less (greater) for business group-affiliated (independent) firms. In addition, the results of this study are robust across alternate measurements of the GPR (GPR Threat & GPR Act), dependent variable, and excluding the crisis & COVID-19 period.
ISSN:1544-6123
1544-6131
DOI:10.1016/j.frl.2023.104574