Policy uncertainty, derivatives use, and firm-level FDI
By Quang Nguyen, Trang Kim, Marina Papanastassiou. Journal of International Business Studies, 2017
132 citations recorded by the source corpus.
We explore the link between uncertainty in economic policy, firm-level FDI, and firm hedging behavior – building upon a newspaper-based index of economic policy uncertainty (EPU). We find that the relative difference in EPU between home and host country has a significant relationship with FDI. Firms increase their FDI level in countries, which have a low level of EPU relative to their home country. In addition, firms use derivatives more intensively in response to an increase in EPU. Interestingly, the link between EPU and corporate derivatives use varies according to the type of firm. Domestic MNCs make the most effective use of derivatives to hedge against EPU exposure.
Subfields: Accounting, Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/4184a42f15a708ce6565a8e9ea3d8e542bfecd74
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Citations in the corpus
- Economic policy uncertainty, stakeholder engagement, and environmental, social, and governance practices: The moderating effect of competition (2020, background): “Moreover, during periods of high uncertainty, studies document that firms increase their financial derivative usage to mitigate their exposure to policy-related risk (Nguyen et al., 2018).”