Geopolitical Risk on the Firm-Level

Increasing geopolitical tensions and conflicts can cause disruptions for business operations. So, how do firms perceive geopolitical risk? The risk can differ between firms, but measurements focus primarily on the macro-level. Therefore, we introduce a new index to measure risk perceptions on the firm-level that we apply to Belgian public firms. To construct the index, we use a text-based content analysis method with a tailored dictionary. We use the index to examine whether geopolitical risk differs between firms and sectors, what the drivers of the risk are in high firms that experience high risk, and how the risk evolves over time. The study contributes to both the economic and security literature by introducing a new index and by creating and exploring new data on Belgian public firms. In addition, the index could become a helpful tool for policy makers that want to finetune their decisions on economic and security policy.