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Monetary Policy Shocks, Financial Heterogeneity, and Corporate Dynamic Investment Activity

In: Handbook of Research on Emerging Theories, Models, and Applications of Financial Econometrics

Author

Listed:
  • Mahbuba Aktar

    (Hajee Mohammad Danesh Science and Technology University)

  • Qu Wenzhou

    (Xiamen University)

  • Hijbulla Al Mahmud

    (Xiamen University)

  • Mohammad Zoynul Abedin

    (Hajee Mohammad Danesh Science and Technology University
    Dalian Maritime University)

Abstract

This chapter aims to scrutinize the role of financial conditions of firms in deciding investment dynamic to monetary policy shocks. Considering leverage and cash holding as explanatory financial variables, firms with low leverage and high cash holding react more to monetary policy shocks in explaining the different investment levels of the firms. The interactions of the monetary policy shock variables are statistically insignificant for the high-leverage and low cash holding firms, but they are statistically significant for the low-leverage and high cash holding firms. This study enhances the literature of corporate investment behavior which can be helpful for developing and optimizing macro-control policies. These results may be of independent interest to policymakers who are concerned about the distributional ramifications of monetary policy across firms.

Suggested Citation

  • Mahbuba Aktar & Qu Wenzhou & Hijbulla Al Mahmud & Mohammad Zoynul Abedin, 2021. "Monetary Policy Shocks, Financial Heterogeneity, and Corporate Dynamic Investment Activity," Springer Books, in: Burcu Adıgüzel Mercangöz (ed.), Handbook of Research on Emerging Theories, Models, and Applications of Financial Econometrics, edition 1, pages 93-108, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-54108-8_4
    DOI: 10.1007/978-3-030-54108-8_4
    as

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