In this paper, the effect of market and macroeconomic uncertainties on corporate investment decisions was examined using the real option investment theory. Two types of uncertainties were investigated: macroeconomic uncertainties (exchange, interest and inflation rates) and market uncertainty (stock market volatility) while corporate investments were measured as the sum of the changes in capital stock and depreciation. Data were obtained for the period 2005-2019 and the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) estimation technique was employed. The results showed a significant difference between the effects of macroeconomic and market uncertainties on corporate investment decisions. We found that macroeconomic uncertainty of inflation rate has positive relationship with corporate investments, with a coefficient of 0.35071, and interest rate uncertainty (0.15567) and exchange rate uncertainty (-0.07852) were also statistically significant, whereas the linear market uncertainty has a negative value of -0.00173 and the quadratic market uncertainty (0.00520) was statistically insignificant. Therefore, interest rate volatility and inflation expectations are not factors constraining investment growth; however, exchange rate uncertainty exerts a substantial negative influence on corporate investment in Nigeria. Given the findings, the study recommends, among others, an appropriate and stable exchange rate policy that makes for easy business planning and forecasting by rational investors. To achieve a stable exchange rate that would bring about increased investment, the government should implement efficient macroeconomic policies, such as those that minimize the structural rigidities in the economy.

In the Nigerian context, there is a gap in the literature on the structural attributes of firms and the extent to which corporate investments are irreversible. Thus, this study was to empirically examine the structural attributes of firms, irreversibility, and uncertainty of corporate investment using the real options theory of investment. The study is based on annual data series of firms listed on the Nigerian Stock Exchange from 2005 to 2019. The study measured structural attributes using competitiveness and monopoly/oligopoly of a firm, macroeconomic uncertainty, inflation, interest, and exchange rates, and examines their association with corporate investments. The study was conducted using a panel dataset adopting a fixed-effect estimation technique that takes into account potential endogeneity and firm specific-effects. The result showed that the macroeconomic uncertainty measure of exchange rate volatility is strongly detrimental to corporate investment decisions. Furthermore, interest rate and inflation volatilities are not detrimental to investment growth, while exchange rate uncertainty has a substantial negative influence on corporate investment. Besides, macroeconomic uncertainty was found to be a greater disincentive for firms with irreversible investments than for firms with more easily reversible investment projects.