Corporate Decision-Making under Uncertainty: Review and Future Research Directions

Murillo Campello and Gaurav Kankanhalli

No 30733, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Uncertainty over future business conditions lies at the heart of firm decision-making. Uncertainty can arise from a myriad of sources and is difficult to measure. We present a simple conceptual framework showing how several key corporate decisions are affected by uncertainty. We also highlight recent advances in the measurement of uncertainty, distinguishing between approaches that gauge aggregate uncertainty and those that capture different dimensions of firm-specific uncertainty. These approaches incorporate information obtained from market prices, big data, machine learning techniques, surveys, and more. We then review the growing body of empirical work that studies the role played by uncertainty in shaping outcomes ranging across corporate investment, asset base composition, innovation, liquidity management, payouts, and mergers. Our review outlines several opportunities for future research.

JEL-codes: G31 G32 (search for similar items in EconPapers)
Date: 2022-12
New Economics Papers: this item is included in nep-cfn and nep-fmk
Note: CF
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Chapter: Corporate decision-making under uncertainty: review and future research directions (2024)
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