Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/185827 
Year of Publication: 
2017
Series/Report no.: 
WWZ Working Paper No. 2017/07
Publisher: 
University of Basel, Center of Business and Economics (WWZ), Basel
Abstract: 
This paper identifies endogenous and exogenous indicators of firms' investment activity, and examine, in particular, the effect that these variables have in co-determining firms' investment decisions. Two channels of spillovers from sovereign risk to firms' capital expenditures are defined. The first channel, the "direct channel", describes responses in capital expenditures from an innovation in sovereign risk. The second channel, the "indirect channel", is a transmission mechanism in which spillovers from changes in sovereign risk indirectly affect a firm's capital expenditures via its capital market risk and profitability. While we observe that the direct risk channel is of major importance in Emerging and Developing Economies, it is comparatively small in Advanced Economies. In the case of the latter, contagion from changes in sovereign risk on firms' capital market risk plays a much more important role.
Subjects: 
Capital expenditures
Risk spillovers
Panel VARX
Differential Evolution
JEL: 
C63
D81
E22
G31
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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