Impact of uncertainty on investments: evidence from the Indonesian industry

Russell, Richard (2024) Impact of uncertainty on investments: evidence from the Indonesian industry. Bachelor thesis, Universitas Pelita Harapan.

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Abstract

This research investigates the impact of economic uncertainty on corporate investment decisions in Indonesia. The study analyzes a sample of publicly listed firms from various industries over a period from 2013 to 2022. Our findings reveal that economic uncertainty has a significant negative impact on corporate investment decisions. Specifically, increased uncertainty leads to reduced investment levels, indicating that firms adopt a more cautious approach in uncertain economic environments. Additionally, the evidence suggests that the effects of uncertainty on corporate investment vary across different quantiles of investment levels. Firms with higher investment levels are impacted differently compared to those with lower investment levels, highlighting the nuanced ways in which uncertainty influences investment behavior across the corporate spectrum. These insights are crucial for policymakers and business leaders seeking to navigate the challenges posed by economic uncertainty and to formulate strategies that mitigate its adverse effects on corporate investment.

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