Policy Uncertainty and Corporate Investment

• 成果类型: Article
• 署名作者: Gulen, Huseyin; Ion, Mihai
• 署名单位: Purdue University System; Purdue University; University of Arizona
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhv050
• 发表日期: 2016
• 页码: 523
• 关键词: cash flow; financial constraints; sunk costs; MARKET; IMPACT; volatility; POLITICS; cycles; debt

摘要

Using a news-based index of policy uncertainty, we document a strong negative relationship between firm-level capital investment and the aggregate level of uncertainty associated with future policy and regulatory outcomes. More importantly, we find evidence that the relation between policy uncertainty and capital investment is not uniform in the cross-section, being significantly stronger for firms with a higher degree of investment irreversibility and for firms that are more dependent on government spending. Our results lend empirical support to the notion that policy uncertainty can depress corporate investment by inducing precautionary delays due to investment irreversibility.