Towards a behavioral theory of MNC response to political risk and uncertainty: The role of CEO wealth at risk

Drawing on behavioral agency research, we examine how CEO equity wealth at risk of loss in the form of restricted stock influences the response of multinational corporations (MNCs) to political risk and political uncertainty. In a sample of 14,765 cross-border greenfield investments and full acquisi...

Full description

Saved in:
Bibliographic Details
Published in:Journal of world business : JWB 2022-01, Vol.57 (1), p.101265, Article 101265
Main Authors: Benischke, Mirko H., Guldiken, Orhun, Doh, Jonathan P., Martin, Geoffrey, Zhang, Yanze
Format: Article
Language:English
Subjects:
Acquisitions
Behavioral Agency
CEO Compensation
Greenfields
Political Risk
Political Uncertainty
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Drawing on behavioral agency research, we examine how CEO equity wealth at risk of loss in the form of restricted stock influences the response of multinational corporations (MNCs) to political risk and political uncertainty. In a sample of 14,765 cross-border greenfield investments and full acquisitions announced by U.S. firms from 2004 to 2016, we find that while greater CEO equity wealth at risk of loss in the form of restricted stock strengthens the (positive) relationship between political risk and MNCs’ choice of greenfield investments over full acquisition, CEO equity wealth at risk of loss does not influence the relationship between political uncertainty and MNCs’ choice of greenfield investments. We contribute to international business theory by introducing a behavioral theory of MNC responses to adverse host country political environments. As such, unlike previous studies that have treated political risk and political uncertainty interchangeably, our study highlights the need to differentiate between political risk and political uncertainty as related yet distinct concepts.
ISSN:1090-9516
DOI:10.1016/j.jwb.2021.101265