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The interplay between uncertainty, managerial decision making, and firm value: Evidence from Bangladesh

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  • Quader, Syed Manzur

Abstract

This paper investigates how uncertainty influences investment and cash-holding decisions and how these nexuses influence the performance of Bangladeshi firms. The results indicate threshold levels of investment and cash holdings up to which investment increases and cash holding decreases with uncertainty, and both reverse afterward. In other words, the effect of uncertainty on investment and cash holding are inverted U and U-shaped, respectively. The results also imply that the shareholders perceive the impact of these managerial decisions on firms' market value at different levels of uncertainty and depict a nonmonotonous relationship between market value and uncertainty.

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  • Quader, Syed Manzur, 2023. "The interplay between uncertainty, managerial decision making, and firm value: Evidence from Bangladesh," Journal of Economics and Business, Elsevier, vol. 123(C).
    • Handle: RePEc:eee:jebusi:v:123:y:2023:i:c:s0148619522000509
    DOI: 10.1016/j.jeconbus.2022.106094
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    Keywords

    Uncertainty; Investment; Cash holding; Market value; Nonmonotonous; Emerging economy;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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