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Economic policy uncertainty and corporate investment: An empirical comparison of Korean chaebol and non-chaebol firms

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  • Vo, Hong
  • Nguyen, Tien
  • Truong, Hang

Abstract

Our paper investigates the effect of economic policy uncertainty on investment by chaebol and non-chaebol firms in Korea. We find that while both types of firms reduce investment during high-policy-uncertainty periods, chaebol firms do so more aggressively than non-chaebols. The negative effect of uncertainty on investment is exacerbated in chaebol firms that are financially constrained, face a higher debt cost, or operate in industries more dependent on external finance. Such impact depends on types of policy uncertainties, in which chaebol firms respond more strongly to uncertainties related to monetary and fiscal policies but not to trade and foreign exchange ones.

Suggested Citation

  • Vo, Hong & Nguyen, Tien & Truong, Hang, 2023. "Economic policy uncertainty and corporate investment: An empirical comparison of Korean chaebol and non-chaebol firms," Finance Research Letters, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323001836
    DOI: 10.1016/j.frl.2023.103810
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