Economic Policy Uncertainty and Corporate Investment Dynamics: Evidence from Listed Chinese Firms

Mingqing Yuan

MPRA Paper from University Library of Munich, Germany

Abstract: This study examines the relationship between economic policy uncertainty (EPU) and corporate investment by employing the two-step system generalized method of moments approach and panel data from 4619 listed firms in China spanning 2003–2022. We comprehensively analyze EPU’s impact on various timelines of investment and show non-linear dynamics within the EPU–investment nexus. Our findings suggest that EPU negatively affects total and short-term investments, but positively influences long-term investment. Total and short-term investments demonstrate a U-shaped association with EPU, while long-term investment follows an inverted U-shaped pattern. Additionally, we explore the effects of ownership and capital structures. Ownership concentration and institutional ownership amplify the negative impact of EPU on total and short-term investment but alleviate it for long-term investment. State ownership exacerbates the adverse effects on total and short-term investments, with no significant impact on long-term investment. We find that increased debt financing and equity financing intensify the adverse impact of EPU on total and short-term investments, while not significantly affecting long-term investment. This study offers policy implications based on investment horizon, ownership structure, and financial leverage, guiding policymakers and corporate decision-makers.

Keywords: Economic policy uncertainty; Corporate investment; Ownership structure; Capital structure (search for similar items in EconPapers)
JEL-codes: C23 D81 E22 G32 P34 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-cfn, nep-cna, nep-fdg and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/119992/1/MPRA_paper_119992.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:119992

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().