Policy uncertainty, derivatives use, and firm-level FDI

• 成果类型: Article
• 署名作者: Quang Nguyen; Kim, Trang; Papanastassiou, Marina
• 署名单位: Middlesex University; Foreign Trade University FTU
• 刊物名称: JOURNAL OF INTERNATIONAL BUSINESS STUDIES
• ISSN/ISSBN: 0047-2506
• DOI: 10.1057/s41267-017-0090-z
• 发表日期: 2018
• 页码: 96-126
• 关键词: firm FDI; hedging behavior; DERIVATIVES USE; Economic policy uncertainty; risk exposure

摘要

We explore the link between uncertainty in economic policy, firm-level FDI, and firm hedging behavior - building upon a newspaper-based index of economic policy uncertainty (EPU). We find that the relative difference in EPU between home and host country has a significant relationship with FDI. Firms increase their FDI level in countries, which have a low level of EPU relative to their home country. In addition, firms use derivatives more intensively in response to an increase in EPU. Interestingly, the link between EPU and corporate derivatives use varies according to the type of firm. Domestic MNCs make the most effective use of derivatives to hedge against EPU exposure.