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Enterprise's perception of economic policy uncertainty and outward foreign direct investment

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  • Ben, Fang
  • Ma, Jingjing

Abstract

This study, based on panel data of Chinese Shanghai-Shenzhen A-share listed companies from 2012 to 2023, systematically examines the micro-level influence mechanism of firms' perceptions of economic policy uncertainty (EPU) on outward foreign direct investment (OFDI). The findings are as follows: Firstly, firms' perceptions of economic policy uncertainty at the enterprise level significantly inhibit their OFDI behavior. Secondly, cash holdings play a significant partial mediating role in the process by which policy uncertainty affects OFDI, revealing firms' financial strategies of using liquidity reserves to cope with policy risks. Heterogeneity analysis indicates that state-owned enterprises (SOEs) are more sensitive to policy changes due to their institutional ties, while technology-intensive firms rely on policy stability for their R&D investments.

Suggested Citation

  • Ben, Fang & Ma, Jingjing, 2025. "Enterprise's perception of economic policy uncertainty and outward foreign direct investment," Finance Research Letters, Elsevier, vol. 85(PE).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pe:s1544612325014850
    DOI: 10.1016/j.frl.2025.108230
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    References listed on IDEAS

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