Policies Supporting Firms in the Face of Global Financial Shocks

Chokri Zehri () and Abualhassan Jumaa Hamid Hamad ()
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Chokri Zehri: Department of Business Administration College of Sciences and Humanities in Al-Sulail Prince Sattam Bin Abdulaziz University, Saudi Arabia
Abualhassan Jumaa Hamid Hamad: Department of Business Administration College of Sciences and Humanities in Al-Sulail Prince Sattam Bin Abdulaziz University, Saudi Arabia

Journal of International Commerce, Economics and Policy (JICEP), 2022, vol. 13, issue 02, 1-23

Abstract: This paper studies the empirical impact of Foreign Assets Management (FAM) on companies’ capital expenditure in emerging market economies with International Financial Shocks (IFS). The empirical analysis uses annual data of 2,931 publicly listed companies in 45 emerging market economies from 2000 to 2019. We analyzed a multiplicative regression of a canonical capital expenditure Q model. The findings show that FAM positively affects companies’ capital expenditure. Moreover, financially restricted companies are more sensitive to the favorable impact of FAM compared to restricted companies. Our results highlight the relevance of considering companies’ heterogeneity when examining the effect of macro-management policies. In addition, FAM has a more favorable impact on companies’ capital expenditure in economies that concurrently use capital controls and macroprudential policy. Finally, our findings suggest that successful macro-management policies insulate capital expenditure from adverse IFS. This result highlights the role of more coordinated approaches to repel adverse international shocks.

Keywords: Foreign assets; financial shocks; capital expenditure (search for similar items in EconPapers)
JEL-codes: F21 F38 F61 G31 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1142/S1793993322500089

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