How Country Risk Affects Business Value
The same business, with the same profits, is worth a different multiple depending on where it operates. Here's why — and by how much.
Valuation multiples are built on the return a buyer expects. In a higher-risk country that required return is higher, so the multiple — and the price — is lower. Economists capture this as the country risk premium: the extra equity return demanded over a stable, mature market. The table below turns each country's risk premium into a simple valuation factor relative to the United States.
| Country | Sovereign rating | Equity risk premium | Value vs US |
|---|---|---|---|
| Australia | Aaa | 4.23% | ~103% |
| Canada | Aaa | 4.23% | ~103% |
| United States | Aa1 | 4.46% | ~100% |
| United Arab Emirates | Aa2 | 4.87% | ~96% |
| United Kingdom | Aa3 | 5.01% | ~94% |
| Ireland | Aa3 | 5.01% | ~94% |
| India | Baa3 | 7.08% | ~77% |
| South Africa | Ba2 | 8.13% | ~71% |
| Nigeria | B3 | 12.64% | ~52% |
| Kenya | Caa1 | 13.94% | ~49% |
“Value vs US” = the share of a comparable US business's multiple, derived from each country's equity risk premium. Source: Aswath Damodaran, NYU Stern — country risk & equity risk premiums, January 2026. Indicative only — not a formal valuation.
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A “Value vs US” of 70% means a business in that country is worth roughly 70% of the multiple the same business would command in the United States. It doesn't mean the business is worse — only that buyers price in the country's risk. Currency, capital controls, and how internationally diversified the customer base is can all soften or sharpen the effect.
Country valuation FAQ
Why is a business worth less in some countries?
Buyers demand a higher return in higher-risk countries, which means a higher discount rate and therefore a lower valuation multiple. The extra return required is called the country risk premium.
How much does country risk change a valuation?
A lot at the extremes. A business in a low-risk market like the US or Australia can be worth roughly twice the multiple of the same business in a high-risk market, purely because of country risk.
Where does the country risk data come from?
From Aswath Damodaran's country risk and equity risk premium datasets at NYU Stern, updated at least annually. We convert each country's risk premium into a valuation factor relative to the US.
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