The Business Cycle, Investor Sentiment, and Economic Policy Uncertainty: Their Impact on Corporate Investment, Employment, and Financing in the Presence of Costly External Finance

2017 ◽  
Vol 31 (1) ◽  
pp. 1-38 ◽  
Author(s):  
Dojoon Park ◽  
Jaehoon Hahn
Keyword(s):  
Economic Policy ◽  
Business Cycle ◽  
Investor Sentiment ◽  
Corporate Investment ◽  
Policy Uncertainty ◽  
Economic Policy Uncertainty ◽  
External Finance ◽  
The Business Cycle

scholarly journals Economic policy uncertainty and investment in Spain

SERIEs ◽  
2021 ◽  
Author(s):  
Daniel Dejuan-Bitria ◽  
Corinna Ghirelli
Keyword(s):  
Adverse Effect ◽  
Economic Policy ◽  
Strong Evidence ◽  
Investment Decisions ◽  
Corporate Investment ◽  
Precautionary Savings ◽  
Marginal Effect ◽  
Policy Uncertainty ◽  
Economic Policy Uncertainty ◽  
High Uncertainty

AbstractThe aim of this paper is to investigate the effect of economic policy uncertainty on firms’ investment decisions. We focus on Spain for the period 1998–2014. To measure policy-related uncertainty, we borrow the economic policy uncertainty (EPU) indicator available for this country. We find strong evidence that uncertainty reduces corporate investment. This relationship appears to be nonlinear, being the marginal effect of uncertainty attenuated toward zero during periods of high uncertainty levels. Furthermore, the heterogeneous results suggest that the adverse effect of uncertainty is particularly relevant for highly vulnerable firms. Overall, these results are consistent with the hypotheses that economic policy-related uncertainty reduces corporate investment through increases in precautionary savings or to worsening of credit conditions.

scholarly journals The Sensitivity of Firms’ Investment to Uncertainty and Cash Flow: Evidence From Listed State-Owned Enterprises and Non-State-Owned Enterprises in China

SAGE Open ◽  
2020 ◽  
Vol 10 (1) ◽  
pp. 215824402090343 ◽  
Author(s):  
Muhammad Arif Khan ◽  
Xuezhi Qin ◽  
Khalil Jebran ◽  
Abdul Rashid
Keyword(s):  
Economic Policy ◽  
Cash Flow ◽  
Generalized Method Of Moments ◽  
Corporate Investment ◽  
Policy Uncertainty ◽  
Market Uncertainty ◽  
Negative Effects ◽  
Economic Policy Uncertainty ◽  
Listed Firms ◽  
Positive Effects

This study examines the association between various uncertainties and corporate investment and further investigates this association between state-owned enterprises (SOEs) and non-state-owned enterprises (non-SOEs). Moreover, this study analyzes the indirect effects of uncertainty on corporate investment through cash flow. The current research uses an unbalanced panel data of Chinese nonfinancial listed firms for the period 1999–2016. To control endogeneity issues, this study applies a robust two-step system generalized method of moments (GMM) technique to estimate the model. Empirical findings indicate that market-based and firm-specific uncertainties have positive effects, whereas economic policy and CAPM-based uncertainties have negative effects on corporate investment. Furthermore, results indicate that the effects of market-based, CAPM-based, and firm-specific uncertainties (economic policy uncertainty) were less (more) prominent for SOEs. Additional analyses show that cash flow stimulates the effect of firm-specific uncertainty on SOEs’ investment, whereas it weakens the influence of CAPM-based uncertainty (economic policy uncertainty) on investment of non-SOEs (SOEs). Moreover, cash flow attenuates the market uncertainty effect on investment.

scholarly journals Sensitivity of economic policy uncertainty to investor sentiment

2019 ◽  
Vol 36 (2) ◽  
pp. 114-129 ◽  
Author(s):  
Mobeen Ur Rehman ◽  
Nicholas Apergis
Keyword(s):  
Economic Policy ◽  
Investor Sentiment ◽  
Policy Uncertainty ◽  
Momentum Effect ◽  
Control Variables ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
Investor Sentiments ◽  
International Investors ◽  
The Impact

Purpose This paper aims to explore the impact of investor sentiments on economic policy uncertainty (EPU). The analysis also considers the momentum effect, stock market returns volatility and equity pricing inefficiencies across markets, which, to the best of the authors’ knowledge, has not been addressed in the literature. The role of these control variables has collectively been considered to have important behavioral implications for international investors Design/methodology/approach Quantile regressions are used for estimation purpose, as it provides robust and more efficient estimates rather than those coming from the traditional regression model. Findings The momentum effect is negative and significant only at higher quantiles, while oil prices are positive and significant across all quantiles. The exchange rate exerts a negative and significant effect on EPU, whereas equity price volatility (i.e. investor sentiment) exerts a negative and significant impact on EPU in most of the quantiles. Research limitations/implications The results have important implications for international investors and policymakers, especially in terms of the breakdown of economic policy uncertainty across different sample markets. The breakdown of complete sample period into sub-samples acts as a robust analysis and documents the similarity of the results for the Asian and developed markets cases, but not in the case of the European markets. Practical implications The findings imply the importance of financial stability that impacts the accumulation of systemic risks and adds smoothness to the financial cycle in particular geographical areas. Originality/value The contribution of this paper is threefold. First, existing literature highlights and empirically tests the impact of economic policy uncertainty on different market, macro-economic and global control variables. The analysis, however, performs it in the reverse order, i.e. analyzing the impact of the momentum effect (investor sentiment variables), equity market inefficiencies and volatility (market variables) and exchange rates and Brent oil (control variables). Second, to check the sensitivity of economic policy uncertainty, the analysis analyzes a wide range of markets, segregated as emerging, developed and European regions over the sample period to generate region-wise implications. Finally, the analysis explores the relationship of aforementioned variables with economic policy uncertainty keeping in view the non-linear structure and prior evidence and investor sentiments and economic policy uncertainty in the regression model.

scholarly journals Investor sentiment and the economic policy uncertainty premium

2020 ◽  
Vol 64 ◽  
pp. 101438
Author(s):  
Gilbert V. Nartea ◽  
Hengyu Bai ◽  
Ji Wu
Keyword(s):  
Economic Policy ◽  
Investor Sentiment ◽  
Policy Uncertainty ◽  
Economic Policy Uncertainty

scholarly journals The Business Cycle, Investor Sentiment, and Costly External Finance

2014 ◽  
Vol 69 (3) ◽  
pp. 1377-1409 ◽  
Author(s):  
R. DAVID MCLEAN ◽  
MENGXIN ZHAO
Keyword(s):  
Business Cycle ◽  
Investor Sentiment ◽  
External Finance ◽  
The Business Cycle

Economic policy uncertainty and corporate investment: Evidence from China

2014 ◽  
Vol 26 ◽  
pp. 227-243 ◽  
Author(s):  
Yizhong Wang ◽  
Carl R. Chen ◽  
Ying Sophie Huang
Keyword(s):  
Economic Policy ◽  
Corporate Investment ◽  
Policy Uncertainty ◽  
Economic Policy Uncertainty
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