Global Journal of Management and Business Research, B: Economics and Commerce, Volume 20 Issue 1

(2015), explained that geopolitics include the effort of countries to project power beyond their territories to fulfill or achieve their national interest-,and because of this pursuit, geopolitics ties geography and politics. In a nutshell, geopolitics had always been closely tied to the act of mapping the world. Flint (2006), stated that geopolitics is part of human geography. Human geography involves understanding what makes places unique and how such places connect and interact (Knox and Marston 2001). Furthermore geographers not only study places but the features of such places, e.g., weather patterns, physical settings, etc.(Flint 2006) The causes of GPR are political instability, terrorism, a conflict between countries or states that can disrupt business activities and international relations(Malmgren 2015, Caldara and Iacoviello 2018).Political instability and violence can damage investment, reduce the productiveness of the overall market, which in turn can affect profitability or survival of investment. Therefore, foreign investors tend to worry about political risk when deciding as to what foreign markets to expand into (Baek and Qian 2011). MIGA, 2011 identified three types of political risks that discourage foreign investment: first, nationalization or expropriation of foreign assets; second, irregularities in policies and regulations in FDI-related policies; and third, war and political violence, including terrorist activities. Geopolitics is complex subject that also includes macroeconomic variables, e.g., interest rates, inflation levels, and trade barriers all affect investment decisions. For instance, any sign of price destabilizations in the global economy usually leads to a geopolitical event (Malmgren 2015).Furthermore, improving growth rates and consistent macroeconomic policies can enhance the attraction of a particular market. (Busse and Hefeker 2007) c) Foreign Direct Investment A well-known conceptualization and theoretical framework for FDI determinants is called the “OLI” framework. The framework” involves grouping micro- and macro-level factors that ascertain why and where multinational companies (MNCs) invest abroad. It outlines that firms invest abroad to seek for three types of advantages: Ownership (O), Location (L), and Internalization (I) advantages. the ownership aspect allows a firm to compete with other firms in the markets they operate regardless of the disadvantages of being foreign. Location advantages are those that makes the chosen foreign country a more suitable business environment for FDI. These advantages can be in the form of labor advantages, natural resources, government regulations, transport costs, macroeconomic stability, and cultural factors. Exploiting an imperfection in external markets can be referred to as Internalization advantages. A typical scenario is the reduction of risk and transaction costs to accumulate knowledge efficiently as well as the reduction of state- generated imperfections.(Dunning 1977, 1993) d) Empirical Literature Review Aysan, Demir et al.(2019), analyzed the predictive power of the global (GPR) index on daily returns and the price volatility of Bit coin, ranging from the year 2010 to 2018. They found that changes in the global GPR index have predictive power on the price volatility and the returns of Bit coin. Balcilar, Bonato et al. (2018) studied the topic of geopolitical risks and stock market dynamics of the BRICS using a hybrid approach based on the frameworks of Nishiyama, Hitomi et al. (2011), and Jeong, Härdle et al. (2012). By gathering monthly geopolitical risk data from the work of Caldara and Iacoviello (2018), they found that geopolitical risks affect the stock markets in a consistent pattern. Caldara and Iacoviello (2018), constructed the geopolitics risk (GPR) index by counting the number of times leading newspapers publish articles that discuss the geopolitical events and risks They created a monthly index starting from 1985 by doing automated text- searches of the electronic archives of eleven (11) newspapers. They concluded that Geopolitical risks cause a decrease in real activity and stock returns. Kyereboah-Coleman and Agyire-Tettey (2008) used Ghana as a case study on the volatility of the real exchange rate. The result shows that the volatility of the real exchange rate has a negative influence on FDI inflow. Hailu (2010) did an empirical analysis of the demand-side determinants of the inflow of FDI to African nations-. The result shows that natural resources, labor quality, trade openness, market accession, and infrastructure condition positively and significantly affect FDI inflows. Soumyananda (2010) investigated the factors that determine FDI in Nigeria. By using the co- integration technique, the result concludes that natural resources, trade intensity, macroeconomic risk factors like inflation, and exchange rates are significant determinants of FDI flow to Nigeria. Obida & Abu (2010) investigated the determinants of FDI in Nigeria by employing the error correction technique to analyze the relationship between market size, deregulation, political instability, exchange rate depreciation and foreign direct investment. The results reveal that the market size of the host country, deregulation, political instability, and exchange rate depreciation are the main determinants of foreign direct investment in Nigeria. Geopolitical Risks (GPRs) and Foreign Direct Investments: A Business Risk Approach © 2020 Global Journals 3 Global Journal of Management and Business Research Volume XX Issue I Version I Year 2020 ( ) B