Investment and uncertainty: Are large firms different from small ones?

Theodore Panagiotidis and Panagiotis Printzis

Journal of Economic Behavior & Organization, 2021, vol. 184, issue C, 302-317

Abstract: We examine the effect of uncertainty on investment by employing panel data from 25,000 Greek firms’ balance sheets. The sample period allows us to consider turbulent and tranquil periods. Uncertainty is proxied by a dynamic factor model. We explore the heterogeneity among the sectors within a panel quantile estimation framework. This allows us to differentiate between relatively low and relatively high values of investment. We reveal the different responses between and within sectors. At aggregate level the effect of uncertainty is negative. This negative effect increases substantially when the firm's investment rate is relatively high. The negative impact of uncertainty is more profound for smaller firms.

Keywords: Greek firms; Uncertainty; Volatility; Quantile regression; Panel data (search for similar items in EconPapers)
JEL-codes: C23 D22 D81 D92 G31 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:184:y:2021:i:c:p:302-317

DOI: 10.1016/j.jebo.2021.01.011

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