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The authors show that there is a negative relationship between economic policy uncertainty (EPU) and firm overinvestment using Korean data from 2007 to 2016. Since Jensen (1986) shows that a firm's free cash flow is an important factor of overinvestment, the authors examine how free cash flow...
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The aim of this paper is to investigate the effect of economic policy uncertainty on firms' investment decisions. We … (EPU) indicator available for this country. We find strong evidence that uncertainty reduces corporate investment. This …-related uncertainty reduces corporate investment through increases in precautionary savings or to worsening of credit conditions. …
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