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Economic uncertainty, supply chain transmission, and corporate effective investment

Author

Listed:
  • Chen, Wenpeng
  • Cheng, Jiahui
  • Zhan, Kai

Abstract

This study examines how economic uncertainty affects corporate effective investment and explores the transmission mechanism through supply chain networks. Using firm-level data from China, we find that uncertainty significantly reduces effective investment, particularly for firms with greater supply chain concentration or more vulnerable network positions. Uncertainty propagates along input–output linkages, with downstream shocks impacting upstream firms. We further show that uncertainty undermines supply chain efficiency and stability, and firms actively respond by reducing supplier concentration, while customer-side adjustments remain limited. The findings offer new insights into corporate risk management under uncertainty.

Suggested Citation

  • Chen, Wenpeng & Cheng, Jiahui & Zhan, Kai, 2026. "Economic uncertainty, supply chain transmission, and corporate effective investment," Pacific-Basin Finance Journal, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:pacfin:v:99:y:2026:i:c:s0927538x26001368
    DOI: 10.1016/j.pacfin.2026.103190
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    JEL classification:

    • 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

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