Corporate Investment Research Articles

Heterogeneous Effect of Uncertainty on Corporate Investment: Evidence from Listed Korean Firms

In this study, we analyse the effect of financial uncertainty on corporate investment using firm-level panel data from the Republic of Korea. We find that financial uncertainty has a significant negative effect on corporate investment, and that the effect is heterogeneous across firms of different sizes. Small firms and large firms are more exposed to the negative effect of uncertainty than medium-sized firms. The negative effect of uncertainty on large firms slightly declined after the global financial crisis (GFC), but it increased for small and medium-sized enterprises (SMEs). Financial constraints and investment irreversibility amplify the negative effect of uncertainty. The inverted U-shaped curve of the uncertainty effect along the firm-size spectrum can be understood as follows: Small firms are more financially constrained and large firms’ investments are more irreversible in nature. Lastly, contrary to widespread belief, uncertainty has waned since 1990, dampening the trend of declining investment ratios. To counter the negative effect of uncertainty on SMEs, policies need to be directed toward the development of capital markets and bond markets for SMEs. Furthermore, SME policies should be redirected to target competitiveness, not protection.

Boardroom networks and corporate investment

This paper investigates whether network effects on investment exist and whether firms strategically herd their connected firms. To construct firm networks, we utilize board-interlock networks where two firms share at least one common board member and estimate network effects on firms’ investment decisions. Our identification strategy is built on adopting characteristics of the peers of peers as legitimate instrumental variables. Empirical findings confirm significant network effects on firms’ investment and show that firms strategically follow their connected firms with high-quality information.

The Impact of Online Sales on Corporate Financing Constraints

China's online sales platforms have surged in the past 15 years, meeting the needs of the majority of consumers and leading economic growth, while also affecting many e-commerce enterprises in terms of investment and financing mechanisms. The ratio of e-commerce online sales to main business income as alternative data contains corporate investment and financing information, and KZ index is finally selected to describe the financing constraints after comparative validation. Using online sales data from Chinese A-share listed companies and some financial data of enterprises in 2016-2022, this paper conducts regression analysis on KZ index and empirically finds that the increase in the online sales ratio is strongly negatively correlated with the degree of funding constraints faced by businesses. With a high degree of participation in e-commerce activities, enterprises will have less financing pressure. This finding brings some inspiration for enterprise operation and financing decisions. Enterprises can reduce the degree of financing constraints by increasing the online sales ratio, so as to better obtain external financing and improve the growth and development of enterprises.

Author Correction: Economic policy uncertainty and corporate investment: evidence from China

Author Correction: Economic policy uncertainty and corporate investment: evidence from China

Female Directors and Investment Efficiency: New Evidence from an Emerging Market

Prior studies show that the effect of female directors on corporate investment efficiency is mixed. This article investigates this relationship in a weak corporate governance setting. With a data of 4,653 firm-years from 582 firms listed in Vietnam during the period 2009–2020, we find that female directors decrease corporate investment efficiency through increasing underinvestment and they have no significant effect on overinvestment. Moreover, the negative relationship between female directors and investment efficiency is stronger in state-owned firms.

Strategic Evolution: The Changing Face of US Development Finance in World Trade

This article presents a comprehensive analysis of the strategic transformation in US development finance, particularly highlighting the shift from the Overseas Private Investment Corporation (OPIC) to the Development Finance Corporation (DFC). It delves into the geopolitical and economic objectives driving this transition, reflecting the broader US strategy to counter China’s Belt and Road Initiative (BRI). The article employs a neo-realistic theoretical framework, supplemented by elements of development and legal theory, to provide a multifaceted understanding of these global trade and investment dynamics. It evaluates the DFC’s operational strategy and commitment to facilitating private investment in developing nations while averting potential debt traps and sovereignty risks. The study further examines the role of International Investment Agreements (IIAs) in safeguarding DFC-backed projects and reviews their substantive rules and dispute resolution methods. The article concludes by positing the DFC as a more sustainable and transparent alternative to the BRI, offering potential benefits for both developing nations and US geopolitical interests. Political risk insurance, financial development, investment financing, Investment Incentive Agreements, International Development Finance Corporation, Belt and Road Initiative, trade policy programs

Does economic liberalization foster corporate investment? Theory and evidence from US and Canadian firms

Prior studies have largely debated and demonstrated the positive effect of economic liberalization on economic growth, but they have not clarified how and to which extent economic liberalization affects corporate investment, the main driver of a country's economic growth. This paper investigates the relationship between economic liberalization and corporate investment by modelling the microeconomic channels through which economic liberalization affects corporate investment. Our theoretical framework extends the standard neoclassical model of firm value maximization to incorporate the effect of economic liberalization on corporate investment via several microeconomic channels. We test the theoretical predictions of our model by using a large and heterogeneous sample of non-financial US firms for the period 2000–2019. The empirical results support our hypotheses that economic liberalization positively affects corporate investment both directly and indirectly through different channels. These effects hold, although with different intensity, for all dimensions of economic liberalization.

Effects of oil price uncertainty on corporate investment of Islamic stocks: evidence from the extreme event of Covid-19 pandemic

Purpose This paper aims to examine the effects of oil price uncertainty on corporate investment of Islamic stocks during the COVID-19 pandemic. Design/methodology/approach The study uses a panel data set that covers 398 listed Islamic stocks from seven major Asia Pacific countries over the period of five years from 2017 to 2021, yielding 1,990 observations. Specifically, this paper investigates the said association by combining the real options theory regarding investment and the panel data-based econometric method that captures the dynamic relationship, the generalized method of moments estimators. Findings The findings show that the relationship between the oil price volatility and corporate investment of Islamic stocks is significant and nonlinear in nature, suggesting the presence of both the growth options and the waiting options. Overall, the results reveal that corporate investment of Islamic stocks is hindered during the unprecedented corona crash, when oil price increases at exponential rates. Practical implications The findings suggest that considering the information caused by unprecedented events like the COVID-19 pandemic is crucial for investment decisions of Islamic stocks. Therefore, policymakers and regulators should incorporate the impact of oil price uncertainties caused by unprecedented events like the COVID-19 pandemic on firm’s investment expansion and diversification strategies. Originality/value To the best of the authors’ knowledge, this paper is the first to examine the relationship between the investment of Islamic stocks and the oil price uncertainty under compound options theory in top Asian oil-importing countries.

Health Care Costs and Corporate Investment

Abstract Health care costs for U.S. employers have tripled over the past 20 years. Using firm-specific health expense data, I show that firms negatively adjust capital expenditures and R&D expenses in response to increases in health care costs. The effects are more pronounced for firms that are financially constrained, employ more high-skilled workers, and have less bargaining power relative to insurers. Furthermore, policy uncertainty surrounding health care costs is substantial and discourages capital investment. These findings suggest that an elevated level of health care costs and the associated uncertainty limit a firm’s ability to expand physically or through innovation.

Financial Management Strategies for Corporate Investments Based on Integer Linear Programming Models

Abstract This paper first gives the financial management strategy of enterprise investment, mainly from determining the financial management model of enterprise investment, improving the centralized management level of funds and optimizing the enterprise investment decision-making process in three aspects. Then, build the financial management model based on integer linear programming through the enterprise investment theory to find the effective investment of assets, the use of absolute deviation risk measurement model to reduce the risk of investment so that the maximization of returns and maintain the stability of returns. Lastly, we utilize Enterprise B as the research object for empirical analysis. From the analysis of investment efficiency, the increment of total assets and net profit is increasing; the increment of total assets in 2022 is 58 million more than that of 2015, and the increment of net profit in 2022 is 49 million more than that of 2015. The data shows that the financial management strategy of business investment improves the investment efficiency of the company and enhances the overall operation of the company’s space.

Does Supply Chain Finance Improve the Corporate Investment Efficiency of New Energy Firms? Evidence from China

ABSTRACT This research investigates how supply chain finance (SCF) affects the investment efficiency of new energy firms by adopting a sample of Chinese listed new energy enterprises from 2011 to 2019. With the help of data envelopment analysis (DEA) combined with the Banker-Charnes-Cooper (BCC) model, we calculate efficiency values and analyze the regression results of the Tobit model, and find that SCF significantly boosts the investment efficiency of new energy corporations by improving their cash-holding position. The results of mechanism analysis also suggest that both supply chain concentration and digital finance positively magnify the relation between SCF and corporate efficiency. After comparing the impact in the new energy firms with different characteristics, we conclude that the SCF effect in promoting corporate investment efficiency is more prominent for non-state-owned new energy enterprises located in the western region that have low equity concentration. The conclusions of this paper shed new light on the fusion of the SCF business into building a new energy industry cluster.

Political uncertainty and corporate investment: Evidence from India

This article examines the relationship between political uncertainty and corporate investments in India. Using the data of 771 non‐financial Indian firms for the period 2007 Q1 to 2020 Q4 and for three general elections, 2009, 2014, and 2019, the study confirms a significant negative impact of political uncertainty on corporate investments and a pronounced impact of political uncertainty on corporate investment in closely contested elections. Also, we find that corporate investment tends to rise post‐election. Additionally, we find that the negative relationship between political uncertainty and corporate investment is more pronounced for politically sensitive industries and firms facing higher financial constraints.

Does ESG reputational risk affect the efficiency and speed of adjustment of corporate investment?

AbstractThis study explores the relationship between environmental, social, and governance (ESG) reputational risk and investment efficiency. We provide evidence that ESG reputational risk relates to higher corporate suboptimal investment (underinvestment) and a lower speed of adjustment back to the optimal investment level. Our findings hold for parametric and nonparametric estimations of underinvestment and are robust to several techniques that address endogeneity and self‐selection. Overall, our study highlights the important role of ESG reputational risk in determining corporate investment efficiency.

Minimum wage and corporate investment efficiency: Evidence from China

This article uses China's A-share listed companies from 2002 to 2020 as a sample, to study the relationship between MW increases and company investment efficiency. The results show that the minimum wage has a significant promotion effect on the investment efficiency of enterprises. The reasons for this situation are: on the one hand, an increase in the minimum wage will increase operating expenses and labor costs, and companies will proactively adjust their production and investment strategies. On the other hand, the increase in per capita capital stock will promote the creativity of enterprises, bring about technological progress and productivity improvement.

GOLDEN VISA GRANTING POLICY AS AN EFFORT TO INVESTMENT ATTRACTION IN INDONESIA

<p><strong><em>ABSTRACT</em></strong><em>; The Government of the Republic of Indonesia issued Regulation of the Minister of Law and Human Rights (Permenkumham) Number 22 of 2023 concerning Visas and Residence Permits as well as Regulation of the Minister of Finance Number 82 of 2023 concerning Types and Tariffs for Types of Non-Tax State Revenue. The Minister of Law and Human Rights Regulation and the Minister of Finance Regulation function as regulations for granting golden visas to investors who wish to invest their capital in Indonesia. The approach method used is empirical juridical with research specifications that are descriptive analytical. The things studied are the policy of granting golden visas to foreign investors in Indonesia and the form of incentives for granting golden visas to foreign investors to invest in Indonesia. In the end, the researchers concluded that the golden visa imposed by the government on foreign investors was a temporary residence permit with a period of 5 (five) years for individual investors and a temporary residence permit with a period of 5 (five) years to 10 (ten) years for corporate investors, then get ease in entering and exiting Indonesia, and ease in not processing a limited residence permit in Indonesia.<strong></strong></em></p>

Firm-level uncertainty and monetary policy transmission: analysis based on investment behavior and annual report text

The loose monetary policy has not translated into actual credit increments, and the real investment rate has declined. This paper extracts the level of policy uncertainty perception from enterprise management analysis and discussion based on text analysis methods to identify the investment intention of enterprises. It is found that enterprise uncertainty perception can weaken corporate investment intention, thus hindering the promotion of loose monetary policy on investment. On the one hand, this paper verifies that uncertainty perception can weaken the effectiveness of monetary policy implementation at the micro level of enterprises; On the other hand, this paper finds that merely being based on the financing constraint theory may not be able to explain the capital investment behavior of Chinese companies. It also requires examining the investment intentions of enterprises themselves, enriching the research conclusions of enterprise investment theory.

Public firm presence, growth opportunity and investment in fixed intangible assets of private UK firms

PurposePrior studies suggest that, in an industry in which several public firms operate (i.e. greater public firm presence), uncertainty about business operations within the industry is reduced due to greater analyst coverage and quality of information disclosure. In this study, the authors examine how UK private firms respond to investment opportunities in fixed intangible assets (FIAs) in an environment characterised by greater public firm presence (PFP).Design/methodology/approachUsing data from 61,278 (1,358) private (public) UK firms operating in ten sectors spanning from 2006 to 2016, the authors conduct this analysis by using panel econometric techniques.FindingsThe authors observe that private firms are more responsive to their FIA investment opportunities when they operate in industries with more PFP. Also, the authors find that firms in industries with better information quality use more debt and have longer debt maturity security but less internal cash flow. Overall, the findings indicate that PFP generates positive externalities for private firms by lessening industry uncertainty and enhancing more efficient FIA investment. The results are robust to endogeneity concerns.Research limitations/implicationsA key limitation of the study is that it focuses on a single country (the UK) and therefore there is a likelihood that the results found are specific to this setting but not others, particularly developing and emerging economies. Thus, future studies could explore these ideas from the viewpoint of multiple countries.Practical implicationsOverall, the study demonstrates the importance of information disclosure in driving investment decisions of firms.Originality/valueWhile this paper builds on the information disclosure and corporate investment literature, it is one of the first attempts, to the best of the authors’ knowledge, to explore how private UK firms respond to investment in FIAs in an environment characterised by greater PFP.

Stock market liberalization and corporate investment revisited: Evidence from China

Recent reform in China has made a subset of Chinese stocks available to foreign investors, partially opening up China's stock market. Our difference-in-differences analysis shows that this liberalization reform boosts investments in investable firms relative to noninvestable ones, with results robust to various sensitivity analyses. Besides capital inflows and risk sharing, a potential but underexplored channel is improved corporate governance due to direct and indirect pressures from foreign investors, which lowers the cost of capital and improves capital allocation efficiency. Consistent with this corporate governance channel, we find that the liberalization reform reduces investable firms’ agency costs, increases their investment efficiency and total factor productivity, and improves their operating performance. Further analysis finds that the positive investment effect from the liberalization reform is stronger among firms that were poorly governed before the reform.

The effect of state ownership on corporate investment efficiency: evidence from listed firms in Vietnam

Extant literature shows that state ownership is a special type of ownership. Politicians tend to follow both social and economic goals to maintain their positions. In some cases, they may sacrifice the latter to achieve the former. Therefore, firms with high state ownership face more serious agency problems than those with low state ownership. This study investigates how state ownership affects corporate investment efficiency in Vietnam, where privatizing state-owned firms is an important economic policy. Our sample includes 4,937 observations from firms listed between 2007 and 2020. Using fixed effects, random effects, random effects Tobit, pooled OLS, and Poisson regression with fixed effects, we find that state ownership has a negative impact on corporate investment efficiency. In addition, the multinomial logistic regression results show that firms with state ownership are more likely to engage in overinvestment. State ownership weakens corporate governance and thus creates opportunities for managers to expropriate shareholders. Managers tend to increase firm size through overinvestment to strengthen their positions; therefore, firms with state ownership have lower investment efficiency.

Literature Study of ESG in Corporate Investment and ESG Rating Status

This paper explores the challenges and solutions related to implementing ESG (Environmen-tal, Social, and Governance) systems within China's traditional industrial sector and pro-vides insights into future development trends. The adoption of ESG practices in traditional industries in China faces obstacles such as limited awareness, financial constraints, and dif-ficulties in measuring impacts accurately. To address these challenges, the paper suggests raising awareness, promoting education, and fostering a culture of sustainability among in-dustry stakeholders. Collaboration between government bodies, industry associations, and financial institutions is also proposed to provide financial incentives and support for ESG adoption. Standardizing ESG metrics and reporting frameworks can enhance transparency and comparability. Looking ahead, the integration of advanced technologies like AI, block-chain, and IoT can facilitate data analysis and decision-making. Public-private partnerships and industry collaborations can accelerate innovation and knowledge sharing. Despite the challenges, proactive measures such as awareness building, financial support, and standard-ized frameworks can lead to a sustainable future. Cooperation between government, indus-try, and society is crucial in embracing ESG advantages, fostering responsible practices, and contributing to a greener and more inclusive economy.