{"id":3934,"date":"2025-03-28T14:39:04","date_gmt":"2025-03-28T18:39:04","guid":{"rendered":"https:\/\/damore-mckim.northeastern.edu\/cem\/?post_type=dmsb_resource&p=3934"},"modified":"2025-04-14T12:20:34","modified_gmt":"2025-04-14T16:20:34","slug":"ideology-and-political-risk-emerging-markets","status":"publish","type":"dmsb_resource","link":"https:\/\/damore-mckim.northeastern.edu\/cem\/resources\/ideology-and-political-risk-emerging-markets\/","title":{"rendered":"Ideology and Political Risk in Emerging Markets"},"content":{"rendered":"\n

This brief is part of the <\/em>Insights @ Center for Emerging Markets<\/em><\/a>, a publication focused on cutting-edge ideas and advice for global leaders about emerging markets<\/em>.<\/p>\n\n\n\n

By Yannick Thams (Florida Atlantic University) & Luis Alfonso Dau<\/a> (Northeastern University)<\/strong><\/strong><\/p>\n\n\n\n

In Short:<\/em><\/strong> Emerging markets offer opportunities, but they also present unique challenges, including political risk and instability. Recent research by Yannick Thams and Luis Alfonso Dau highlights how the personal political ideology of a CEO often determines how companies respond to these challenges. Thams and Dau focused on corporate responses to the 2022 Russian invasion of Ukraine, revealing that a CEO's liberal or conservative leanings significantly impacted the likelihood of a company's decision to exit the Russian market.<\/em><\/p>\n\n\n\n

Traditionally, business decisions, especially those involving international market entry or exit, are viewed through a purely economic lens. Factors like profitability, market share, and strategic advantage dominate the discussion. However, when faced with crises and political shocks, a CEO's personal values can play an important role.<\/p>\n\n\n\n

Thams and Dau looked at 189 public companies and found that liberal-leaning CEOs were significantly more likely to \u201cself-sanction\u201d and withdraw from Russia in the initial 40 days following the invasion, before any formal government sanctions were imposed. Their research also revealed that the motivation for such action went beyond risk assessment to reflect fundamental differences in priorities.<\/p>\n\n\n\n

Liberal CEOs appeared to be more attuned to the concerns of a broader range of stakeholders, including employees, customers, and the general public, and were more likely to prioritize social justice concerns and respond to external pressure from activist groups. Consequently, remaining in the Russian market, which they perceived as morally compromised, conflicted with their core values, prompting a faster exit.<\/p>\n\n\n\n

Conservative CEOs, in contrast, appeared to prioritize shareholder wealth and property rights. While not insensitive to ethical considerations, their primary focus was on the financial well-being of the company. This can lead to a more cautious approach to de-internationalization, even in the face of significant political turmoil.<\/p>\n\n\n\n

Practical Implications<\/strong><\/h3>\n\n\n\n

This research holds several crucial takeaways for executives operating in, or considering entering, emerging markets.<\/p>\n\n\n\n