Policy uncertainty and corporate investment

Huseyin Gulen, Mihai Ion

Research output: Contribution to journalReview articlepeer-review

1419 Scopus citations


Using a news-based index of policy uncertainty, 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 relation between policy uncertainty and capital investment is not uniform in the cross-section, being significantly stronger for firms with a higher degree of investment irreversibility and for firms that are more dependent on government spending. Our results lend empirical support to the notion that policy uncertainty can depress corporate investment by inducing precautionary delays due to investment irreversibility.

Original languageEnglish (US)
Pages (from-to)523-564
Number of pages42
JournalReview of Financial Studies
Issue number3
StatePublished - Mar 1 2016

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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