The Differential Impact of Political Uncertainty on Investment Decisions in Foreign and Domestic Firms in Turkey

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Abstract

We test two hypothesis with two different indicators of political risk about the influence political uncertainty has on investments in Turkey. The first hypothesis is that foreign firms invest more. The second is that foreign firms also invest more under a scenario of increasing political risk. We only find support for the first hypothesis, while for the second results show that it is only foreign owned firms in Turkey that experience higher investment adjustment cost due to political risk. The results are robust to endogeneity, different indicators of political risk and different measures of foreign capital participation.
Original languageEnglish
Publication date2020
Publication statusPublished - 2020
EventAllied Social Science Association/American Economic Association, Annual Meeting: Middle East Economic Association - Marriott Marquis San Diego Marina, San Diego, United States
Duration: 3 Jan 20205 Jan 2020
https://www.aeaweb.org/conference/

Conference

ConferenceAllied Social Science Association/American Economic Association, Annual Meeting
LocationMarriott Marquis San Diego Marina
CountryUnited States
CitySan Diego
Period03/01/202005/01/2020
Internet address

Keywords

  • Foreign direct investment
  • investment adjustment cost
  • relative performance
  • political risk
  • uncertainty
  • firm-level panel data

Cite this

Jensen, C., & Dreyer, J. K. (2020). The Differential Impact of Political Uncertainty on Investment Decisions in Foreign and Domestic Firms in Turkey. Paper presented at Allied Social Science Association/American Economic Association, Annual Meeting, San Diego, United States.