Nowadays, non-financial corporations invest heavily in financial assets, questioning the traditional boundaries of non-financial firms. We investigate how economic policy uncertainty affects firms' holding of non-currency financial assets and portfolios of such assets in China. We find that...

Risk is a vital concept to grasp when investing in a firm or project. It is also a key ingredient required to evaluate the cost of capital and perform a valuation. An organization’s capital structure, specifically the amount of leverage and debt financing employed, must be accounted for to...

Recent empirical evidence suggests that US industrial firms invest heavily in noncash, risky financial assets. Using hand-collected data on financial portfolios of German firms, we show that risky asset holdings are not an anomaly unique to the US. We find that industrial firms in Germany invest...

Using a news-based index of aggregate policy uncertainty in the US economy, we document a strong negative relation between policy uncertainty and corporate risk-taking. We show that high levels of policy uncertainty are associated with significantly lower future stock return volatility at the...

In this paper, we study how legal uncertainty affects economic activity. We develop a parsimonious model with different types of legal uncertainty that reduce economic activity and that can be classified as idiosyncratic (i.e., diversifiable) or systematic (i.e., nondiversifiable). We test the...

We examine the effects of government policy uncertainty on cross-border capital flows. FDI flows from US companies to foreign affiliates drop significantly during the period just before an election. The election effect for FDI is larger than election cycles in domestic investment. The electoral...

This study proposes a new approach that bridges the asset pricing implications of economic policy uncertainty (EPU) and the dynamic debt-financing decisions of Chinese firms. The approach introduces a new variable, firm-level policy risk (FLPR), in empirical tests. FLPR embraces two elements,...

The aim of this paper is to investigate the effect of policy uncertainty on firms' investment decisions. We focus on Spain for the period 1998-2014. To measure policy-related uncertainty, we use a new macroeconomic indicator constructed for this country. We find strong evidence that policy...

Using the policy uncertainty index of Baker, Bloom, and Davis (2013), we document a strong negative relationship between firm-level capital investment and the aggregate level of uncertainty associated with future policy and regulatory outcomes. More importantly, we find evidence that the...

We examine the effects of political uncertainty on cross-border capital flows using election timing as a source of fluctuations in political uncertainty. FDI flows from US companies to foreign affiliates drop significantly during the period just before an election and increase after the...