Publication Search Results

Now showing 1 - 1 of 1
  • (2021) Cai, Lin
    This thesis consists of three chapters that investigate the linkage between uncertainty and corporate investment decisions on an international basis. In first chapter, I investigate the extent of U.S. policy-related spillovers into 22 other real economies. I find that, after accounting for factors previously used to explain corporate investment, US Economic Policy Uncertainty (US EPU, hereafter) fluctuations affect foreign corporate investments through two channels. First, the single effect of US EPU on international corporate investment shows an unequivocal negative relation (the direct channel). Second, an increase in US EPU also attenuates the negative sensitivity of corporate investment towards the cost of capital (the indirect channel). Further, I find that while the direct channel of US EPU on corporate investment persists across several subsamples, its indirect channel relates to a high degree of dependence on the U.S. economy and opacity exhibited by local economies. The second chapter reconciles the contrary views on the foreign investors using local disaster shocks from 46 countries over the period 1998-2018. I find that local disaster shocks cause significant disruptions to corporate investments, but foreign institutional investors attenuate the costs of disaster risks. The benefits associated with foreign institutional investors are not uniformly held across all economies, where the role of foreign institutional investors is particularly measurable in countries with well-developed institutional environment. The third chapter focuses on the uncertainty at domestic level using national elections across 23 different countries. I find that the corporate investment cycle corresponds with the timing of national elections, but there is a cross-sectional difference in the firm-level investment sensitivity to elections. During election periods, while firms temporarily reduce investment expenditures relative to nonelection years, the decline is mainly sourced from firms with greater political exposures. Further, I find that the investment cycles are more volatile when the election outcomes are uncertain, and the institutional environments are weaker.