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When uncertainty meets capability: How managerial competence shapes firms’ real and financial investments under economic uncertainty

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  • Tao, Cheng
  • Liu, Daoyu
  • Ja’afar, Roslan
  • Hussain, Wan Mohd Hirwani Wan

Abstract

Amid rising economic uncertainty (EU), firms face increasing challenges in optimizing investment decisions. Using panel data on Chinese A-share main board firms from 2011 to 2023, this study examines how EU affects corporate investment behavior. Fixed-effects results show that EU reshapes firms’ investment structure by reducing real investment while increasing financial investment, thereby intensifying corporate financialization. Mediation analysis indicates that declines in real investment under uncertainty drive the rise in financial investment. Threshold analysis further reveals heterogeneity: higher managerial capability mitigates overinvestment in real assets but strengthens the positive link between EU and financial investment. Firm size and profitability further condition these effects.

Suggested Citation

  • Tao, Cheng & Liu, Daoyu & Ja’afar, Roslan & Hussain, Wan Mohd Hirwani Wan, 2026. "When uncertainty meets capability: How managerial competence shapes firms’ real and financial investments under economic uncertainty," Finance Research Letters, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:finlet:v:96:y:2026:i:c:s1544612326003156
    DOI: 10.1016/j.frl.2026.109785
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