Report

How Firms’ Perceptions of Geopolitical Risk Affect Investment

Abstract: Geopolitical risk has intensified in recent years, driven by events such as Russia’s invasion of Ukraine, escalating tensions between the United States and China, and conflicts in the Middle East. But how risky is the geopolitical landscape according to US firms? This brief presents a new index based on earnings call transcripts that reflects US firms’ perceptions of geopolitical risk and examines how those assessments affect their future investment, that is, their spending on long-term assets such as facilities, equipment, and technology.

Keywords: geopolitical risk; firm investment; cash position;

JEL Classification: D80; E22; G30;

Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: Current Policy Perspectives

Publication Date: 2025-02-13

Number: 25-3