Impact of Geopolitical Events on Global Investment Banking: An Empirical Analysis of the Period (2015-2025)

Abstract

Geopolitical risk has become an increasingly important determinant of financial market behaviour and strategic decision-making within the global investment banking industry. Political conflicts, trade disputes, economic sanctions, pandemics, and regional instability have contributed to heightened uncertainty, influencing cross-border financial transactions and capital market activities. This study examines the relationship between geopolitical risk and selected indicators of global investment banking performance during the period 2015–2025. Using secondary data compiled from the International Monetary Fund (IMF), World Bank, Bank for International Settlements (BIS), Financial Stability Board (FSB), Bloomberg, Reuters, and annual reports of leading investment banks, the study analyses trends in the Geopolitical Risk (GPR) Index, global mergers and acquisitions (M&A) activity, initial public offerings (IPOs), investment banking revenues, and cross-border capital flows.
Descriptive statistics, year-on-year trend analysis, and Pearson's correlation coefficient are employed to examine the association between geopolitical risk and investment banking indicators. The findings indicate a consistent inverse relationship between the GPR Index and the selected indicators, with correlation coefficients ranging from –0.69 to –0.81. These results suggest that periods of heightened geopolitical uncertainty are generally associated with lower levels of M&A activity, IPO issuance, investment banking revenues, and international capital movements. However, given the limited sample of annual observations and the absence of control variables, the findings should be interpreted as evidence of statistical association rather than causal relationships.
The study further highlights that leading investment banks have increasingly incorporated geopolitical risk into enterprise risk management through geographical diversification, enhanced regulatory compliance, digital transformation, and AI-enabled risk monitoring systems. The paper contributes to the growing literature on geopolitical risk by providing an integrated assessment of multiple investment banking indicators over a decade characterised by significant geopolitical disruptions. It also identifies opportunities for future research using more robust econometric approaches incorporating additional macroeconomic control variables.