2,183
Views
3
CrossRef citations to date
0
Altmetric
FINANCIAL ECONOMICS

Economic policy uncertainty and corporate investment: Does quality of governance matter?

ORCID Icon, , &
Article: 2157118 | Received 13 Jul 2022, Accepted 06 Dec 2022, Published online: 16 Dec 2022

References

  • Abel, A. B. (1983). Optimal investment under uncertainty. The American Economic Review, 73(1), 228–20. https://www.jstor.org/stable/1803942
  • Abel, A. B., & Blanchard, O. J., 1986. Investment and sales: Some empirical evidence. NBER Working Paper 2050. University of Pennsylvania.
  • Adelino, M., Ma, S., & Robinson, D. (2017). Firm age, investment opportunities, and job creation. The Journal of Finance, 72(3), 999–1038. https://doi.org/10.1111/jofi.12495
  • Adjei, F. A., & Adjei, M. (2017). Economic policy uncertainty, market returns, and expected return predictability. Journal of Financial Economic Policy, 9(3), 242–259. https://doi.org/10.1108/JFEP-11-2016-0074
  • Agomor, P. E., Onumah, J. M., & Duho, K. C. T. (2022). Intellectual capital, profitability, and market value of financial and non-financial services firms listed in Ghana. International Journal of Learning and Intellectual Capital, 19(4), 312–335. https://doi.org/10.1504/IJLIC.2022.123841
  • Akron, S., Demir, E., Díez-Esteban, J. E. M., & García-Gomez, C. D. (2020). Economic policy uncertainty and corporate investment: evidence from the U.S. Hospitality industry. Tourism Management, 77(April), 1–10. https://doi.org/10.1016/j.tourman.2019.104019
  • Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277–297. https://doi.org/10.2307/2297968
  • Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29–51. https://doi.org/10.1016/0304-4076(94)01642-D
  • Azhar, A. B., Abbas, N., Waheed, A., & Malik, Q. A. (2019). The impact of ownership structure and corporate governance on investment efficiency: An empirical study from Pakistan Stock Exchange (PSX). Pakistan Administrative Review, 3(2), 84–98. https://nbn-resolving.org/urn:nbn:de:0168-ssoar-63378-8
  • Bah, M., & Kpognon, K. (2021). Public investment and economic growth in ECOWAS countries: Does governance matter? African Journal of Science, Technology, Innovation and Development, 13(6), 713–726. https://doi.org/10.1080/20421338.2020.1796051
  • Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. The Quarterly Journal of Economics, 131(4), 1593–1636. https://doi.org/10.1093/qje/qjw024
  • Breusch, T., & Pagan, A. (1980). The LaGrange multiplier test and its applications to model specification in econometrics. The Review of Economic Studies, 47(1), 239–253. https://doi.org/10.2307/2297111
  • Caballero, R. J. (1991). On the Sign of the investment—uncertainty relationship. American Economic Review, 81(1), 279–288. https://www.jstor.org/stable/2006800
  • Caixe, D. F. (2022). Corporate governance and investment sensitivity to policy uncertainty in Brazil. Emerging Markets Review, 51, 100883. https://doi.org/10.1016/j.ememar.2021.100883
  • Chen, P. F., Lee, C. C., & Zeng, J. H. (2019). Economic policy uncertainty and firm investment: Evidence from the U.S. Market. Journal of Applied Economics, 51(31), 3423–3435. https://doi.org/10.1080/00036846.2019.1581909
  • Chu, J., & Fang, J. (2021). Economic policy uncertainty and firms’ labor investment decision. China Finance Review International, 11(1), 73–91. https://doi.org/10.1108/CFRI-02-2020-0013
  • Chu, A. C., & Lai, C. C. (2013). Money and the welfare cost of inflation in an R&D growth model. Journal of Money, Credit and Banking, 45(1), 233–249. https://doi.org/10.1111/j.1538-4616.2012.00568.x
  • Cohen, J., Webb, L. H., & Khalil, S. (2017). A further examination of the impact of corporate social responsibility and governance on investment decisions. Journal of Business Ethics, 146(1), 203–218. https://doi.org/10.1007/s10551-015-2933-5
  • Cui, X., Wang, C., Liao, J., Fang, Z., & Cheng, F. (2021). Economic policy uncertainty exposure and corporate innovation investment: Evidence from China. Pacific-Basin Finance Journal, 67, 101533. https://doi.org/10.1016/j.pacfin.2021.101533
  • Cui, X., Yao, S., Fang, Z., & Wang, H. (2021a). Economic policy uncertainty exposure and earnings management: Evidence from China. Accounting and Finance, 61(3), 3937–3976. https://doi.org/10.1111/acfi.12722
  • Dai, L., & Zhang, B. (2019). Political uncertainty and finance: A survey. Asia-Pacific Journal of Financial Studies, 48(3), 307–333. https://doi.org/10.1111/ajfs.12257
  • Darsono, S. N. A. C., Wong, W.-K., Nguyen, T. T. H., & Wardani, D. T. K. (2022). The economic policy uncertainty and its effect on sustainable investment: A panel ARDL approach. Journal of Risk and Financial Management, 15(6), 254. https://doi.org/10.3390/jrfm15060254
  • Demir, E., & Ersan, O. (2017). Economic policy uncertainty and cash holdings: Evidence from BRIC countries. Emerging Markets Review, 33(December), 189–200. https://doi.org/10.1016/j.ememar.2017.08.001
  • Doan, A. T., Phan, T., & Lin, K. L. (2020). Governance quality, bank price synchronicity, and political uncertainty. International Review of Economics and Finance, 69(September), 231–262. https://doi.org/10.1016/j.iref.2020.05.002
  • Driss, H., Drobetz, W., Ghoul, S. E., & Guedhami, O. (2021). Institutional investment horizons, corporate governance, and credit ratings: International evidence. Journal of Corporate Finance, 67(April), 101874. https://doi.org/10.1016/j.jcorpfin.2020.101874
  • Duchin, R., Ozbas, O., & Sensoy, B. A. (2010). Costly external finance, corporate investment, and the subprime mortgage credit crisis. Journal of Financial Economics, 97(3), 418–435. https://doi.org/10.1016/j.jfineco.2009.12.008
  • Du, J., Li, W., Lin, B., & Wang, Y. (2018). Government integrity and corporate investment efficiency. China Journal of Accounting Research, 11(3), 213–232. https://doi.org/10.1016/j.cjar.2017.03.002
  • Ernstberger, J., & Grüning, M. (2013). How do firm- and country-level governance mechanisms affect firms’ disclosure? Journal of Accounting and Public Policy, 32(3), 50–67. https://doi.org/10.1016/j.jaccpubpol.2013.02.003
  • Escribá, F. J., & Murgui, M. J. (2009). Government policy and industrial investment determinants in Spanish regions. Regional Science and Urban Economics, 39(4), 479–488. https://doi.org/10.1016/j.regsciurbeco.2009.02.005
  • Essen, M. V., Engelen, P. J., & Carney, M. (2013). Does “good” corporate governance help in a crisis? The impact of country- and firm-level governance mechanisms in the European financial crisis. Corporate Governance: An International Review, 21(3), 201–224. https://doi.org/10.1111/corg.12010
  • Farooq, U., Ahmed, J., & Khan, S. (2021). Do the macroeconomic factors influence the firm’s investment decisions? A generalized method of moments (GMM) approach. International Journal of Finance and Economics, 26(1), 790–801. https://doi.org/10.1002/ijfe.1820
  • Feng, X., Lo, Y. L., & Chan, K. C. (2019). Impact of economic policy uncertainty on cash holdings: Firm-level evidence from an emerging market. Asia-Pacific Journal of Accounting & Economics, 1–23. https://doi.org/10.1080/16081625.2019.1694954
  • Guariglia, A., Liu, X., & Song, L. (2011). Internal finance and growth: Microeconometric evidence on Chinese firms. Journal of Development Economics, 96(1), 79–94. https://doi.org/10.1016/j.jdeveco.2010.07.003
  • Hartman, R. (1972). Effects of price and cost uncertainty on investment. Journal of Economic Theory, 5(2), 258–266. https://doi.org/10.1016/0022-0531(72)90105-6
  • He, F., Ma, Y., & Zhang, X. (2020). How does economic policy uncertainty affect corporate innovation?–Evidence from China-listed companies. International Review of Economics & Finance, 67(May), 225–239. https://doi.org/10.1016/j.iref.2020.01.006
  • Huang, W., Jiang, F., Liu, Z., & Zhang, M. (2011). Agency cost, top executives’ overconfidence, and investment-cash flow sensitivity: Evidence from listed companies in China. Pacific-Basin Finance Journal, 19(3), 261–277. https://doi.org/10.1016/j.pacfin.2010.12.001
  • Iheonu, Iheonu, C. O., & Okechukwu, C. (2019). Governance and Domestic Investment in Africa. Journal of Government and Economics, 8(1), 63–80. https://doi.org/10.17979/ejge.2019.8.1.4565
  • Ilyas, M., Khan, A., Nadeem, M., & Suleman, M. T. (2021). Economic policy uncertainty, oil price shocks, and corporate investment: Evidence from the oil industry. Energy Economics, 97, 105193. https://doi.org/10.1016/j.eneco.2021.105193
  • Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115(1), 53–74. https://doi.org/10.1016/S0304-4076(03)00092-7
  • Iqbal, U., Gan, C., & Nadeem, M. (2020). Economic policy uncertainty and firm performance. Applied Economics Letters, 27(10), 765–770. https://doi.org/10.1080/13504851.2019.1645272
  • Istiak, K., & Serletis, A. (2018). Economic policy uncertainty and real output: Evidence from the G7 countries. Applied Economics, 50(39), 4222–4233. https://doi.org/10.1080/00036846.2018.1441520
  • Jackson, C., & Orr, A. (2019). Investment decision-making under economic policy uncertainty. Journal of Property Research, 36(2), 153–185. https://doi.org/10.1080/09599916.2019.1590454
  • Kaufmann, D., Kraay, A., & Mastruzzi, M. (2011). The worldwide governance indicators: Methodology and analytical issues. Hague Journal on the Rule of Law, 3(2), 220–246. https://doi.org/10.1017/S1876404511200046
  • Killins, R. N. (2020). Firm-specific, industry-specific and macroeconomic factors of life insurers’ profitability: Evidence from Canada. The North American Journal of Economics and Finance, 51, 1–16. https://doi.org/10.1016/j.najef.2019.101068
  • Knight, F. H. (1921). Risk, Uncertainty, and Profit. Houghton Mifflin Company.
  • Lee, C. C., Lee, C. C., & Xiao, S. (2021). Policy-related risk and corporate financing behavior: Evidence from China’s listed companies. Economic Modelling, 94(January), 539–547. https://doi.org/10.1016/j.econmod.2020.01.022
  • Lee, C. C., Wang, C. W., & Ho, S. J. (2020). Country governance, corruption, and the likelihood of firms’ innovation. Economic Modelling, 92(November), 326–338. https://doi.org/10.1016/j.econmod.2020.01.013
  • Liu, G., & Zhang, C. (2020). Economic policy uncertainty and firms’ investment and financing decisions in China. China Economic Review, 63, 101279. https://doi.org/10.1016/j.chieco.2019.02.007
  • Nguyen, P. D., & Dong, P. T. A. (2013). Determinants of corporate investment decisions: The case of Vietnam. Journal of Economics and Development, 15(1), 32–48. https://doi.org/10.33301/2013.15.01.02
  • Ogbonna, O. E., Ogbuabor, J. E., Manasseh, C. O., & Ekeocha, D. O. (2022). Global uncertainty, economic governance institutions, and foreign direct investment inflow in Africa. Economic Change and Restructuring, 55(4), 2111–2136. https://doi.org/10.1007/s10644-021-09378-w
  • Omoteso, K., & Mobolaji, H. I. (2014). Corruption, governance and economic growth in Sub-Saharan Africa: A need for the prioritisation of reform policies. Social Responsibility Journal, 10(2), 316–330. https://doi.org/10.1108/SRJ-06-2012-0067
  • Omri, A. (2020). Formal versus informal entrepreneurship in emerging economies: The roles of governance and the financial sector. Journal of Business Research, 108(January), 277–290. https://doi.org/10.1016/j.jbusres.2019.11.027
  • Passos, N., & Modenesi, A. D. M. (2021). Do public banks reduce monetary policy power? Evidence from Brazil based on state dependent local projections (2000–2018). International Review of Applied Economics, 35(3–4), 502–519. https://doi.org/10.1080/02692171.2020.1837745
  • Pesaran, M. H., 2004. General diagnostic tests for cross section dependence in panels. CESifo working paper series 1229. Munich.
  • Shiau, H. L., Chang, Y. H., & Yang, Y. J. (2018). The cash holdings and corporate investment surrounding financial crisis: The cases of China and Taiwan. The Chinese Economy, 51(2), 175–207. https://doi.org/10.1080/10971475.2018.1447833
  • Thakur, B. P. S., & Kannadhasan, M. (2019). Corruption and cash holdings: Evidence from emerging market economies. Emerging Markets Review, 38, 1–17. https://doi.org/10.1016/j.ememar.2018.11.008
  • Vithessonthi, C., Schwaninger, M., & Müller, M. O. (2017). Monetary policy, bank lending, and corporate investment. International Review of Financial Analysis, 50, 129–142. https://doi.org/10.1016/j.irfa.2017.02.007
  • Wang, Y., Chen, C. R., & Huang, Y. S. (2014). Economic policy uncertainty and corporate investment: evidence from China. Pacific-Basin Finance Journal, 26(January), 227–243. https://doi.org/10.1016/j.pacfin.2013.12.008
  • Wu, J., Zhang, J., Zhang, S., & Zou, L. (2020). The economic policy uncertainty and firm investment in Australia. Applied Economics, 52(31), 3354–3378. https://doi.org/10.1080/00036846.2019.1710454
  • Xie, F. (2009). Managerial flexibility, uncertainty, and corporate investment: The real options effect. International Review of Economics & Finance, 18(4), 643–655. https://doi.org/10.1016/j.iref.2008.11.001
  • Xie, G., Chen, J., Hao, Y., & Lu, J. (2019). Economic policy uncertainty and corporate investment behavior: Evidence from China’s five-year plan cycles. Emerging Markets Finance and Trade, 1–18. https://doi.org/10.1080/1540496X.2019.1673160
  • Xu, Z. (2020). Economic policy uncertainty, cost of capital, and corporate innovation. Journal of Banking & Finance, 111, 105698. https://doi.org/10.1016/j.jbankfin.2019.105698
  • Zhang, B. (2019). Economic policy uncertainty and investor sentiment: Linear and nonlinear causality analysis. Applied Economics Letters, 26(15), 1264–1268. https://doi.org/10.1080/13504851.2018.1545073
  • Zhang, Y., Zhang, M., Liu, Y., & Nie, R. (2017). Enterprise investment, local government intervention, and coal overcapacity: The case of China. Energy Policy, 101, 162–169. https://doi.org/10.1016/j.enpol.2016.11.036