Three essays on corporate finance and uncertainty

Kamble, Vaibhav Keshav

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https://hdl.handle.net/2142/121306 Copy

Description

Title

Three essays on corporate finance and uncertainty

Author(s)

Kamble, Vaibhav Keshav

Issue Date

2023-07-07

Director of Research (if dissertation) or Advisor (if thesis)

Nelson, Carl

Doctoral Committee Chair(s)

• Nelson, Carl
• Almeida , Heitor

Committee Member(s)

• Ridley , William
• Devadoss , Stephen

Department of Study

Agr & Consumer Economics

Discipline

Agricultural & Applied Econ

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

Corporate investment, trade policy, uncertainty, instrumental variable, real options, Trump

Abstract

From 2016 to 2019, the United States and China engaged in a trade conflict. As a result of tariffs imposed by the US and retaliation from China that started in 2018, the US economy witnessed an unprecedented increase in trade policy uncertainty (TPU). Using a new instrumental variable, I find a significant negative relation between aggregate TPU and corporate investment. Deviating from the existing literature in corporate finance that uses measures of overall economic policy uncertainty (EPU), I use a focused measure of TPU to show that a real options channel partly drives the relationship between uncertainty and corporate investment. Furthermore, I identify a foreign exchange channel: businesses more exposed to exchange rate fluctuations are also more susceptible to the negative effect of TPU. These findings are robust to controlling for firm-level and time-level fixed effects, using an alternative definition of aggregate TPU and firm-level (rather than aggregate) TPU.

Graduation Semester

2023-08

Type of Resource

Thesis

Handle URL

https://hdl.handle.net/2142/121306

Copyright and License Information

Copyright 2023 Vaibhav Kamble

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