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Economic policy uncertainty and corporate investment: Evidence from China

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  • Wang, Yizhong
  • Chen, Carl R.
  • Huang, Ying Sophie
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    Abstract

    This paper studies how economic policy uncertainty influences corporate investment for Chinese listed companies. We show that when the degree of economic policy uncertainty is higher, firms stand to lower their investment and vice versa. However, firms that have higher return on invested capital, use more internal finance and are not state-owned mitigate the negative effect of policy uncertainty on corporate investment. Moreover, firms in regions with higher degree of marketization are more sensitive to the economic policy uncertainty. The evidence illustrates that keeping the transparency and stability of the implementation of economic policies can improve corporate investment efficiency.

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    Bibliographic Info

    Article provided by Elsevier in its journal Pacific-Basin Finance Journal.

    Volume (Year): 26 (2014)
    Issue (Month): C ()
    Pages: 227-243

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    Handle: RePEc:eee:pacfin:v:26:y:2014:i:c:p:227-243

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    Web page: http://www.elsevier.com/locate/pacfin

    Related research

    Keywords: Economic uncertainty; Policy uncertainty; Corporate investment; China;

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    Cited by:
    1. Nikolaos Antonakakis & Ioannis Chatziantoniou & George Filis, 2014. "Dynamic Spillovers of Oil Price Shocks and Policy Uncertainty," Department of Economics Working Papers wuwp166, Vienna University of Economics, Department of Economics.

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