Corruption News and Corporate Investment: Evidence from China

2021 ◽  
Vol 16 (3) ◽  
pp. 405-446
Author(s):  
Carlos D. Ramirez ◽  
◽  
Yi Huang ◽  
Keyword(s):  
Corporate Investment ◽  
Stock Exchanges ◽  
Policy Uncertainty ◽  
Political Uncertainty ◽  
Standard Deviation Increase ◽  
External Finance ◽  
The Press ◽  
Negative Effect ◽  
The Cost ◽  
Investment In China

We examine whether corporate corruption scrutiny affects corporate investment in China. A corruption news index (CNI) containing firm-specific measures of corruption scrutiny was developed by tracking all articles in the press about corruption for all firms trading on the Shanghai and Shenzhen stock exchanges between 2000 and 2016. We found that a standard deviation increase in CNI is associated with a modest and short-lived decline in investment, ranging from 2 to 10 percent, with a stronger effect among SOEs. We explore two channels that can explain the CNI-investment effect: (i) a shift in the cost of external finance and (ii) a rise in political uncertainty connected with corporate corruption scrutiny. Our results indicate that CNI lowers the cost of external finance, pointing to a beneficial aspect of corruption cleanup. However, the effect of CNI on investment is amplified in the presence of provincial political turnover, providing support for the political uncertainty channel. The results also indicate that the negative effect of CNI on investment has significantly declined since 2013, supporting the proposition that the long-term benefits of corruption cleanup outweigh the short-term costs associated with policy uncertainty.

Did Glass-Steagall Increase the Cost of External Finance for Corporate Investment?: Evidence From Bank and Insurance Company Affiliations

1999 ◽  
Vol 59 (2) ◽  
pp. 372-396 ◽  
Author(s):  
Carlos D. Ramírez
Keyword(s):  
Financial Institutions ◽  
Control Sample ◽  
Corporate Investment ◽  
Insurance Company ◽  
External Finance ◽  
External Funds ◽  
Investment Spending ◽  
The Cost ◽  
The Way

The Glass-Steagall Act may have increased the cost for corporations of raising external funds for investment spending. Significant differences are found in the way financial institutions influenced corporate investment spending. Investment regressions for a sample of companies affiliated to financial institutions are estimated and compared to those for a control sample. Prior to Glass-Steagall, affiliated companies do not display any sensitivity between investment spending and internal measures of liquidity, whereas the control sample does.

Financial Constraints, Stock Returns and R&D in Indian Stock Market

2021 ◽  
pp. 097226292098839
Author(s):  
Pankaj Sinha ◽  
Priya Sawaliya
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Financial Constraints ◽  
Fixed Effect Model ◽  
Quantitative Information ◽  
Common Shocks ◽  
External Finance ◽  
Negative Effect ◽  
Security Returns ◽  
Indian Stock Market

When the accessibility of external finance prohibits a firm from taking the optimum decision related to investment, that firm is called financially constrained. By applying the methodology of Kaplan and Zingales (1997) and Lamont et al. (2001), the current study has created a construct to gauge the level of financial constraints (FC) of the companies which emanate from quantitative information. The study explores whether FC factor is present in the Indian stock market and explores whether the security returns of those firms that are financially constrained move in tandem. The study also attempts to establish the association between security returns and R&D of financially constrained firms. On a sample of 63 R&D reporting companies of S&P BSE 500, traded over the period March 2008 to February 2019, the study used the Fama–French methodology, fixed effect model and the ordered logistic regression. The study finds that firms that are highly constrained earn more returns than low constrained firms. Second, the security returns of firms that are financially constrained move in tandem because these firms are affected by common shocks. This suggests that the FC factor exists in the Indian stock market. Finally, when R&D interacts with the level of FC, then this interaction effect has a negative effect on returns.

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.

The effect of economic policy uncertainty on US tourism net exports

2021 ◽  
pp. 135481662110253
Author(s):  
Abebe Hailemariam ◽  
Kris Ivanovski
Keyword(s):  
Economic Policy ◽  
Policy Uncertainty ◽  
Structural Vector Autoregression ◽  
Economic Policy Uncertainty ◽  
Vector Autoregression Model ◽  
Long Run ◽  
Negative Effect ◽  
Positive Shock ◽  
Net Export ◽  
Positive Effect

This article models the endogenously interrelated relationship between global economic policy uncertainty (EPU), world industrial production (WIP), and the demand for US tourism net export (TNX) expenditures. To do so, we apply an identified structural vector autoregression model over monthly data spanning from January 1999 to October 2020. Our findings reveal that a positive shock in WIP has a significant positive effect on demand for TNXs. In contrast, unanticipated increases in price and EPU have a statistically significant negative effect on TNXs. Our results show that, in the long run, a one standard deviation shock in global EPU explains about 26.05% of the variations in tourism net service exports.

The effect of political uncertainty on the cost of corporate debt

2015 ◽  
Vol 16 ◽  
pp. 106-117 ◽  
Author(s):  
Maya Waisman ◽  
Pengfei Ye ◽  
Yun Zhu
Keyword(s):  
Corporate Debt ◽  
Political Uncertainty ◽  
The Cost

Can foreign aid free the press?

2016 ◽  
Vol 12 (3) ◽  
pp. 603-621 ◽  
Author(s):  
NABAMITA DUTTA ◽  
CLAUDIA R. WILLIAMSON
Keyword(s):  
Standard Deviation ◽  
Panel Data ◽  
Foreign Aid ◽  
Financial Support ◽  
Press Freedom ◽  
Standard Deviation Increase ◽  
Role Of The State ◽  
The Press ◽  
The Mean

AbstractCan foreign aid help free the press? Aid may boost press freedom by incentivizing government to reduce media regulations and provide financial support for infrastructure. Alternatively, foreign aid may prevent press freedom by expanding the role of the state and promoting government over private enterprises. We contend that the magnitude of foreign aid's influence is conditional on the existence of democratic checks. Using panel data from 1994 to 2010, we find evidence suggesting that aid significantly increases press freedom in democracies but insignificantly relates to press freedom in autocracies. Collectively, the results suggest that a standard deviation increase in aid to a country at the mean level of democracy increases press freedom by approximately a 1/20th standard deviation. Overall, the findings suggest that donors should be cautious as most aid recipients are not democratic and aid leads to only relatively small marginal improvements in press freedom.

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