Honorary doctor Iftekhar Hasan: Global political affinities can have an impact on borrowing costs

Iftekhar Hasan, Professor of Finance from Fordham University and Scientific Advisor of the Bank of Finland, delivered a keynote speech on the impact of global political affinities on global financial markets and the cost of financing. He emphasised the impact of countries' political ties with the United States on a range of financial instruments, including sovereign bonds, corporate loans, bank lending, and stock market returns. To measure the political ties with the United States, he used, for example, the voting data from the United Nations General Assembly.

Professor Hasan's research highlights that closer political ties with the United States can affect sovereign borrowing costs. According to Hasan, the effect is stronger for non-OECD and lower-income countries. Strong ties with the U.S. can also affect capital raising in global bond markets. The effects can be seen in lower borrowing costs, higher issuance amounts, and longer maturities in the Yankee bond market.

Additionally, stronger U.S. ties amplify the sensitivity of stock market returns to global financial cycles, a trend not seen with political ties to the EU or China. The effects vary by country, time period, and sector. The results are driven by stock returns in developing countries, but the amplification is seen only when geopolitical risk is low. Consumer-facing sectors are especially sensitive to these changes.

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Iftekhar Hasan holds the title of University Professor at Fordham University and has forged a distinguished career in finance. He also serves as the E. Gerald Corrigan Chair in Finance, academic director of the Ph.D. programme, and co-director of the Center for Research in Contemporary Finance at Gabelli School of Business. He is an honorary faculty member at the University of Sydney and a research fellow at the Financial Institution Center at the Wharton School and the IWH Institute in Halle. He is also the managing editor of the Journal of Financial Stability.

Professor Hasan's research interests are in the areas of financial institutions, corporate finance, capital markets, and emerging economies, focusing on interdisciplinary questions and public policy issues. He has had a strong practical impact as a scientific advisor at the Bank of Finland. He is involved in joint projects with the University of Vaasa and has contributed to these with a very broad and high level of expertise.

The 5th Vaasa Banking Research Workshop was organised by the University of Vaasa and Hanken School of Economics.

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Read more about the University of Vaasa honorary doctors and the sixth Ceremonial Conferment of Doctoral Degrees.