We investigate the effect of uncertainty on investment. We employ a unique dataset of 25000 Greek firms' balance sheets for 14 years covering the period before and after the eurozone crisis. A dynamic factor model is employed to proxy uncertainty. The investment performance of 14 sectors is...

We document that the variance risk premium in asset returns decreases firms' investments.We theoretically model the premium; we find that it increases the value of the real optionto delay an investment and, thus, influences investments negatively. Empirically, we verifythe negative link between...

We argue the earnings announcement premium is a measure of firm-specific uncertainty aversion. Our stylized model shows earnings announcements, as pure news events, are priced only if investors are uncertainty averse; further, the earnings announcement return is negatively correlated to future...

Let us suppose that presently unimagined is possible, that “the unexpected may happen” (Marshall, 1920, p. 347). Then “human decisions affecting the future, whether personal, political or economic, cannot depend on strict mathematical expectation since the basis for making such...

In this paper we study the determinants of investment decisions at the firm level with heterogeneous capital goods. We exploit a newly developed panel dataset of small and medium-sized firms which allows us to distinguish between purchases, sales, and net acquisitions of capital goods. We...

This paper investigates the link between the optimal level of non-financial firms' liquid assets and industry-level uncertainty. We develop a structural model of a firm's value maximization problem that predicts that as industry-level uncertainty increases the firm will increase its optimal...

The paper explores the investment behaviour of German firms in the context of the Qapproach, which plays a dominant role in empirical investment research. The analysis is based on the Deutsche Bundesbank's corporate balance sheet statistics. The panel data set contains some 2,300 German firms'...

After the end of communism enterprises in Central and Eastern Europe (CEE) were marked by low levels of labor productivity, mainly because of too high employment levels. According to economic theory, the corporate capital structure can be an important element in the restructuring process. But...

This paper analyses the effects of the Initial Public Offering (IPO) market on real investment decisions in emerging industries. We first propose a model of IPO timing based on divergence of opinion among investors and short-sale constraints. Using a real option approach, we show that firms are...

While the negative qualitative relation between the cost of debt capital and firm age is rather well established in the financial economics literature, there are few, if any, quantitative estimates available of the magnitude of the age effect. This study analyses this effect by utilizing a large...