No abstract

We investigate the effect of uncertainty on investment. We employ a unique dataset of 25000 Greek firms' balance sheets for 14 years covering the period before and after the eurozone crisis. A dynamic factor model is employed to proxy uncertainty. The investment performance of 14 sectors is examined within a dynamic investment model. Robust GMM estimates of the investment rate model reveal a high degree of heterogeneity among these sectors. Overall uncertainty affects negatively investment performance and this effect substantially increased in the years of crisis. Agriculture and Mining are the least affected and the most affected ones include Manufacturing, Real Estate and Hotels. Focusing on the response of investment to uncertainty, it emerges that (relative) smaller firms are affected more compared to larger ones.

We examine the effect of uncertainty on investment by employing panel data from 25000Greek firms' balance sheets. The sample period allows us to consider turbulent and tranquil periods. Uncertainty is proxied by a dynamic factor model. We explore the heterogeneity among the sectors within a panel quantile estimation framework. This allows us to differentiate between relatively low and relatively high values of investment. We reveal the different responses between and within sectors. At aggregate level the effect of uncertainty is negative. This negative effect increases substantially when the firm's investment rate is relatively high. The negative impact of uncertainty is more profound for smaller firms.