Political risk, outward investment diversification and corporate resilience

Using firm-level data on Chinese listed firms’ outward foreign direct investments, we empirically examine the impact of host-country political risk on overseas investment diversification and explore the correlations of host-country political risk, overseas diversification, and corporate resilience. The results reveal that host-country political risk significantly encourages Chinese firms to diversify their overseas investment geographically, indicating that as host-country political risk rises, firms increase overseas diversification to mitigate risk. State-owned enterprises and firms investing in Belt and Road Initiative economies are more inclined to adopt overseas investment diversification. Firms’ resilience can be significantly enhanced when political risk rises if they adopt an overseas diversification strategy.