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:: Volume 33, Issue 114 (quarterly journal of economic research and policies 2025) ::
qjerp 2025, 33(114): 6-56 Back to browse issues page
Examining the Impact of Political Risks on the Price-to-Earnings (P/E) Ratio in Developing Countries
Alireza Omidi , Seyed mehdi Barakchian * , Ali Motavasseli
Institute of Management and Planning , m.barakchian@imps.ac.ir
Abstract:   (1299 Views)
The price-earnings ratio (p/e) is one of the most widely used criteria for evaluating and comparing stocks in the capital market. The p/e ratio shows significant variations (ranging from less than 6 to more than 20) among developing countries with relatively similar characteristics, such as higher risks, lower income, and faster economic growth. Identifying the underlying causes of these differences helps with a better understanding of how stocks are valued in different environments. Using annual data from 26 developing countries over the period 2003 to 2020, the analysis shows that political risk, as measured by the ICRG index, significantly reduces the p/e ratio. A 10-point decrease in the political risk score decreases p/e ratio by 4/3-points. The results are robust to alternative model specifications, accounting for control variables such as dividend payout ratio (DPO), risk-free rate, GDP growth rate, inflation rate, and global risk index (VIX). Additionally, the results are held under different estimation techniques, including GMM and FGLS.
Keywords: Stock Market, Price-to-earnings ratio (p/e), Political Ris
Full-Text [PDF 813 kb]   (519 Downloads)    
Type of Study: Research | Subject: Special
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Omidi A, Barakchian S M, Motavasseli A. Examining the Impact of Political Risks on the Price-to-Earnings (P/E) Ratio in Developing Countries. qjerp 2025; 33 (114) :6-56
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Volume 33, Issue 114 (quarterly journal of economic research and policies 2025) Back to browse issues page
فصلنامه پژوهشها و سیاستهای اقتصادی Journal of Economic Research and Policies
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