Corporate investment, economic policy uncertainty and geopolitical risk in BRICS countries.
Objective: This study aims to analyze the effects of economic policy uncertainty (EPU) and geopolitical risk (GPR) on the corporate investment levels (INV) of publicly traded companies in emerging countries within the BRICS group. It seeks to understand how these uncertainties, often associated with...
| Autores: | , , , |
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| Tipo de recurso: | artículo |
| Estado: | Versión publicada |
| Fecha de publicación: | 2024 |
| País: | Brasil |
| Institución: | Universidade Federal de Ouro Preto (UFOP) |
| Repositorio: | Repositório Institucional da UFOP |
| Idioma: | inglés |
| OAI Identifier: | oai:repositorio.ufop.br:123456789/20561 |
| Acceso en línea: | https://www.repositorio.ufop.br/handle/123456789/20561 https://doi.org/10.14392/asaa.2024170305 |
| Access Level: | acceso abierto |
| Palabra clave: | Corporate investment Economic policy uncertainty Geopolitical risk |
| Sumario: | Objective: This study aims to analyze the effects of economic policy uncertainty (EPU) and geopolitical risk (GPR) on the corporate investment levels (INV) of publicly traded companies in emerging countries within the BRICS group. It seeks to understand how these uncertainties, often associated with governmental decisions and geographical conflicts, influence the postponement of corporate investments, particularly in the context of developing economies, in light of real options theory. Methodology: The analysis is based on quarterly financial data from 192 companies based in Brazil, 33 in Russia, and 1,890 in China, except those in the financial sector, collected from LSEG's Refinitiv Datastream database, from 2004 to 2019. Regression with fixed effects panel data was used, considering as explanatory variables the characteristics of the firms (size, leverage, operating cash flow, sales growth, profitability, Tobin's Q, cash retention, and tangible assets) and macroeconomic indicators (GDP and inflation). Results: The results indicated a negative relationship between EPU, GPR, and INV, with varying intensities between countries. This suggests that consistent with the option to wait, firms reduce their level of investment during periods of high economic uncertainty or geopolitical risk. In addition, the results highlighted that environments with less economic and geopolitical uncertainty favor the level of investment by companies in emerging countries. In addition, the negative effects identified persisted in crisis contexts, as well as the moderation of uncertainty measures by companies' profitability and tangibility. Contributions: The results broaden the understanding of the predominantly negative effects of economic policy uncertainty and geopolitical risk on corporate investment decisions, in the context of emerging countries. The results, in line with some of the literature, highlight the importance of mitigating these effects to stimulate investment in emerging countries. The findings provide crucial inputs for governments, regulators, and economic policymakers to implement measures capable of reducing uncertainty and risk, thus fostering a more favorable business environment for investment. |
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