Economic policy uncertainty and corporate investment: Evidence from China

Yizhong Wang, Carl R. Chen and Ying Sophie Huang

Pacific-Basin Finance Journal, 2014, vol. 26, issue C, 227-243

Abstract: This paper studies how economic policy uncertainty influences corporate investment for Chinese listed companies. We show that when the degree of economic policy uncertainty is higher, firms stand to lower their investment and vice versa. However, firms that have higher return on invested capital, use more internal finance and are not state-owned mitigate the negative effect of policy uncertainty on corporate investment. Moreover, firms in regions with higher degree of marketization are more sensitive to the economic policy uncertainty. The evidence illustrates that keeping the transparency and stability of the implementation of economic policies can improve corporate investment efficiency.

Keywords: Economic uncertainty; Policy uncertainty; Corporate investment; China (search for similar items in EconPapers)
JEL-codes: D80 E22 E60 G18 G32 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (272)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:26:y:2014:i:c:p:227-243

DOI: 10.1016/j.pacfin.2013.12.008

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