Research on Corporate Overseas Asset Allocation under the Contagion of Geopolitical Risks

Abstract

Based on the country-specific distribution data of overseas assets of 586 A-share listed companies in China from 2018 to 2023, this paper constructs an overseas asset diversification index (HHI) and uses a two-way fixed effects model and event study method to systematically explore the dynamic impact of geopolitical risks on corporate overseas asset allocation. The study found that: (1) For every standard deviation increase in the GPR index, the overseas asset diversification of enterprises decreased significantly by 0.009, indicating that enterprises hedged geopolitical risks through a "multi-regional diversification" strategy; (2) Taking the Russia-Ukraine conflict in 2022 as an exogenous event, the average cumulative abnormal return of sample companies within the event window of −5 to +20 was positive; (3) Enterprises with high-risk exposure adjusted their assets significantly more than those with low-risk exposure when geopolitical risks increased. This paper aims to provide a micro-level decision-making basis for corporate overseas asset allocation, and at the same time provide a systematic reference for enterprises to optimize their global layout and for governments to improve their cross-border risk management system.