Does Geopolitical Risk Matter for Corporate Investments in the Hotel and Restaurant Industry? Evidence From India

We examine the relationship between geopolitical risk (GPR) and corporate investments considering 395 Indian hotel and restaurant industry firms from 2003 to 2020. The choice of this industry is motivated by the fact that they require recurrent investments in fixed assets. We find a statistically negative association between our variables of interest. These findings are robust to alternative measurements of dependent and independent variables. We also observe that even the lesser financially constrained firms cannot mitigate the negative effects of GPR entirely. We further report that firms in this industry reduce more investments when GPR rises as compared to when it falls by an equal proportion. Nonetheless, the optimum deployment of security forces can alleviate the adversities of GPR to a considerable extent. We believe our findings add more insights to the existing knowledge, which may be useful to regulators and business leaders in other emerging and frontier markets