The Determinants of Country Risk Analysis

The paper examines the effect of various economic and political factors on country risk ratings published by Euromoney and Institutional Investor. As global competition drives corporations, managers frequently rely on country risk analysis as a crucial aspect of strategic decision-making. The purpose of this paper is to investigate the extent to which country risk measures can help in predicting country ratings. We examine seven widely used measures of country risk across sixty-one countries. Results from the empirical analysis indicate that country risk ratings can be replicated to a significant degree with a few available political and economic indicators. Political risk was found to exert a significant influence on country ratings. The results also confirmed that both Euromoney and Institutional ratings predicted similar outcomes.