Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/184789
Authors: 
Chen, Cheng
Senga, Tatsuro
Sun, Chang
Zhang, Hongyong
Year of Publication: 
2017
Series/Report no.: 
Working Paper 838
Abstract: 
How do real-time expectations affect firms' economic decisions? We provide evidence by using a dataset on Japanese multinational firms' sales forecasts and exploring an unexpected escalation of a territorial dispute between China and Japan in 2012. Our estimation substantiates that, after the escalation of the dispute, affiliates of Japanese multinational firms in China experienced a sharp but temporary decline in total sales relative to affiliates in other countries and a more persistent decline in investment. Moreover, the territorial dispute has led to persistent pessimism in these firms' expectations about future sales, which can explain 60% of the overall decline in investment.
Subjects: 
forecasts
pessimistic expectations
geopolitical events
investment
JEL: 
E22
E32
D84
F51
Document Type: 
Working Paper
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