Estimating a Logistic Regression Model on the Impact of Geopolitical Risk on Financial Development

The study aimed to uncover the impact of geopolitical risk on financial development. The study applied logistic regression model on the data gathered from the year 2010 to the year 2024 for fifty-three countries chosen at random around the globe. The study used simple random sampling in selecting the countries to the study. The theoretical framework for the study was based on the functional and securitization perspective. The study tested the hypothesis that geopolitical risk is significantly and positively associated with financial development, as measured by financial stability (computed by volatility of stock prices), financial depth (computed by financial systems deposit to GDP), financial access (computed by number of bank branches per 100,000 adults) and financial efficiency (computed by bank net interest margin). The results of hypothesis testing revealed that geopolitical risk is significantly and negatively associated with financial stability (as measured by stock price volatility), financial access (as measured by bank branches per 100,000 adults) and financial efficiency (as measured by bank interest margin). Further testing of the hypothesis revealed that geopolitical risk is significantly and positively correlated with financial depth (as measured by financial systems deposit to GDP). Banking institutions, investors and non-banking financial institutions located in areas of moderate, elevated and heightened geopolitical threats and acts should rethink and repatriate funds and investments to safe havens around the globe. Intercountry and regional as well as international cooperation and collaborations are crucial for mitigating geopolitical risk of any form. The relationship between geopolitical risk and financial development is both symmetrical and asymmetrical as it is at times based on the non-traditional, known, unknown and the unknown.