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Relationship between policy uncertainty and corporate investment
Kadoura, Sara
Kadoura, Sara
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ilovepdf_merged.pdf
Adobe PDF, 5.2 MB
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ilovepdf_merged.pdf
Adobe PDF, 5.2 MB
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Abstract
This research examines the relationship between economic policy uncertainty (EPU) and corporate capital
investment across the Gulf Cooperation Council (GCC) region, focusing on firm-level behavior in response
to macroeconomic and regulatory shifts. Drawing on panel data from Bloomberg and refined through robust
statistical analysis, the study explores how internal financial variables—namely, cash flow from operations,
total assets, and revenue—interact with external uncertainty to shape investment decisions in a region
undergoing significant economic transformation.
The results reveal that internal financial health remains a key driver of capital investment across GCC firms.
Companies with higher liquidity and asset bases are more inclined to invest, reinforcing the role of financial
flexibility in uncertain environments. However, a surprising negative relationship between revenue and
investment suggests that higher-revenue firms may favor leaner growth models or prioritize short-term
financial performance over long-term capital expansion. While EPU does not show a statistically significant
direct impact on investment in the current model, its steady upward trend across the sample period signals a
broader climate of growing uncertainty that may influence investment decisions more subtly or in sector-
specific ways.
By situating firm-level financial behavior within the broader GCC economic context, this study offers
valuable insights for policymakers and business leaders seeking to foster investment amid ongoing fiscal
reforms, diversification efforts, and global volatility. The findings underscore the importance of regulatory
clarity, policy consistency, and financial resilience in shaping confident investment strategies across the
region.