Corporate Investment and Exchange Rate Uncertainty

• Main Authors: Yung-Wang Chang, 張永旺
• Other Authors: Shi-Kuan Chen
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/66437295303727220594

碩士 === 國立臺灣大學 === 國際企業學研究所 === 95 === This paper constructs an investment equation according to theory of accelerator, cash flow model, neoclassical investment theory and Tobin’s Q theory. The factors that influence corporate investment decision are the level of output, the level of profit, user cost of capital. In order to take into account the relationship between exchange rate and investment, we added foreign exchange rate and exchange rate volatility to the investment equation. Employing a large panel of listed companies of Taiwan covering from year 1996 to 2005 and adopting fixed effects model we estimate the impact of the above variables on investment. This article finds that the level of output and the level of profit have a positive effect on the investment. The user cost of capital and exchange rate has a negative effect on the investment. This conforms to the theory conclusion. But exchange rate has a significantly negative effect on high export propensity. It provides evidence that a devaluation may positively affect export propensity firms’ investment spending. Exchange rate volatility has a positive effect on the investment. But firms with greater market power can offset the negative effects of a volatile exchange rate.