| This dissertation proposes a theoretically innovative and statistically meaningful way of estimating political risk in emerging markets. After a thorough discussion of existing theories of political risk, the dissertation proposed an alternative that, on the one hand, rooted risk in state stability and, on the other, defined stability as the congruence of values and institutions. The statistical analysis of relevant empirical data from Eastern European and Latin American countries in the 1990's confirmed the proposition that stability can be determined by analyzing the congruence of values and institutions and established an indicator of this stability for the medium term---the tenure of the longest standing veto player. By applying scenario planning and simulation methodology, this finding was effectively related to political risk and used to generate measures of the riskiness of future political contingencies. While the study's findings have immediate implications for investors in emerging markets since they can help them better estimate the required returns for investing oversees, it also makes a contribution to the academic study of new democracies. The role of veto players for stability suggests that the success of political and economic reforms in these societies is dependent upon the dismantling of old elites and the advent of new political actors capable of a different type of policy-making. |
