The Effect of Economic Policy Uncertainty on Corporate Investment: Evidence from Companies Listed on the Tehran Stock Exchange

Objective: Corporate investment in corporate financial theory is influenced by various factors, that are important in evaluating, identifying and determining the optimal level of investment of companies. Given the fact that firms often face a great deal of uncertainty about the timing, content, and...

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Autores principales: Somayeh Loni, Ezatollah Abbasian, Golamali Haji
Formato: article
Lenguaje:FA
Publicado: University of Tehran 2021
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Acceso en línea:https://doaj.org/article/2930652b8ab248cebdaa518cc8277770
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spelling oai:doaj.org-article:2930652b8ab248cebdaa518cc82777702021-11-14T06:00:55ZThe Effect of Economic Policy Uncertainty on Corporate Investment: Evidence from Companies Listed on the Tehran Stock Exchange1024-81532423-537710.22059/frj.2021.310437.1007069https://doaj.org/article/2930652b8ab248cebdaa518cc82777702021-08-01T00:00:00Zhttps://jfr.ut.ac.ir/article_83584_97b97cfe0a993ce97f91e9383e5c3625.pdfhttps://doaj.org/toc/1024-8153https://doaj.org/toc/2423-5377Objective: Corporate investment in corporate financial theory is influenced by various factors, that are important in evaluating, identifying and determining the optimal level of investment of companies. Given the fact that firms often face a great deal of uncertainty about the timing, content, and potential effects of economic policy decisions, it is important to examine the implications of economic policy uncertainties. This article examines the effect of economic policy uncertainty on corporate investment in companies listed on the Tehran stock exchange during the period 2007-2020. Methods: The studied model was estimated once with the entry of each of the variables of uncertainty resulting from inflation, interest rate, exchange rate, economic growth, monetary and fiscal policy. The uncertainty of each variable is calculated using by Hodrick-Prescott filtering. Then, the effect of economic policy uncertainty on corporate investment was investigated using GMM by introducing the composite index of economic policy uncertainty resulting from the analysis of the main components of the mentioned variables. Results: The results showed that the effect of the combined index of economic policy uncertainty as well as all uncertainty variables on corporate investment is negative and significant. In addition, the results showed that monetary policy uncertainty had a greater impact on corporate investment than fiscal policy uncertainty. Conclusion: Economic uncertainty, by disrupting the price system, directing liquidity to financial assets and reduces the inflow of liquidity into production, reduces corporate investment. In addition, the role of monetary policy stability is more prominent due to the major dependence of firms on banking resources.Somayeh LoniEzatollah AbbasianGolamali HajiUniversity of Tehranarticleeconomic uncertaintycorporate investmentfiscal policymonetary policyFinanceHG1-9999FAتحقیقات مالی, Vol 23, Iss 2, Pp 249-268 (2021)
institution DOAJ
collection DOAJ
language FA
topic economic uncertainty
corporate investment
fiscal policy
monetary policy
Finance
HG1-9999
spellingShingle economic uncertainty
corporate investment
fiscal policy
monetary policy
Finance
HG1-9999
Somayeh Loni
Ezatollah Abbasian
Golamali Haji
The Effect of Economic Policy Uncertainty on Corporate Investment: Evidence from Companies Listed on the Tehran Stock Exchange
description Objective: Corporate investment in corporate financial theory is influenced by various factors, that are important in evaluating, identifying and determining the optimal level of investment of companies. Given the fact that firms often face a great deal of uncertainty about the timing, content, and potential effects of economic policy decisions, it is important to examine the implications of economic policy uncertainties. This article examines the effect of economic policy uncertainty on corporate investment in companies listed on the Tehran stock exchange during the period 2007-2020. Methods: The studied model was estimated once with the entry of each of the variables of uncertainty resulting from inflation, interest rate, exchange rate, economic growth, monetary and fiscal policy. The uncertainty of each variable is calculated using by Hodrick-Prescott filtering. Then, the effect of economic policy uncertainty on corporate investment was investigated using GMM by introducing the composite index of economic policy uncertainty resulting from the analysis of the main components of the mentioned variables. Results: The results showed that the effect of the combined index of economic policy uncertainty as well as all uncertainty variables on corporate investment is negative and significant. In addition, the results showed that monetary policy uncertainty had a greater impact on corporate investment than fiscal policy uncertainty. Conclusion: Economic uncertainty, by disrupting the price system, directing liquidity to financial assets and reduces the inflow of liquidity into production, reduces corporate investment. In addition, the role of monetary policy stability is more prominent due to the major dependence of firms on banking resources.
format article
author Somayeh Loni
Ezatollah Abbasian
Golamali Haji
author_facet Somayeh Loni
Ezatollah Abbasian
Golamali Haji
author_sort Somayeh Loni
title The Effect of Economic Policy Uncertainty on Corporate Investment: Evidence from Companies Listed on the Tehran Stock Exchange
title_short The Effect of Economic Policy Uncertainty on Corporate Investment: Evidence from Companies Listed on the Tehran Stock Exchange
title_full The Effect of Economic Policy Uncertainty on Corporate Investment: Evidence from Companies Listed on the Tehran Stock Exchange
title_fullStr The Effect of Economic Policy Uncertainty on Corporate Investment: Evidence from Companies Listed on the Tehran Stock Exchange
title_full_unstemmed The Effect of Economic Policy Uncertainty on Corporate Investment: Evidence from Companies Listed on the Tehran Stock Exchange
title_sort effect of economic policy uncertainty on corporate investment: evidence from companies listed on the tehran stock exchange
publisher University of Tehran
publishDate 2021
url https://doaj.org/article/2930652b8ab248cebdaa518cc8277770
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