The Impacts of Uncertainty on Investment: Empirical Evidence from Manufacturing Firms in Korea

Abstract

This paper investigates the empirical relationship between investment and uncertainty using the firm level data of Korean manufacturing sector. Empirical results show that uncertainty is negatively correlated with investment only for the post-crisis sample period. In particular, the negative effect of uncertainty on investment is more significant for low interest coverage ratio firms, high debt-asset ratio firms and small firms. The results are consistent with the claim that firms act in a more risk-averse manner after the financial crisis. This paper also finds a significant sensitivity of investment to cash flows only for the pre-crisis sample period, suggesting that financial constraint is not relatively important in explaining low investment after the financial crisis.

Keywords

• 불확실성(uncertainty)
• 투자(investment)
• q모형(q model)