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Firm-level investment in the extractive industry from CEE countries: the role of macroeconomic uncertainty and internal conditions

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Abstract

This paper investigates the impact of external and internal conditions on firms’ investment in CEE countries, applying a panel data analysis, over the time-span 2008–2014. We use AMADEUS statistics for 412 companies and we focus on the extractive industry. The external conditions are associated with the macroeconomic uncertainty related to the economic growth and price level, while for the internal conditions we have retained as explanatory variables the leverage and liquidity ratios. The firms’ investment dynamics is computed as the growth rate of fixed assets. Our results obtained using static and dynamic estimators, show that both external and internal conditions influence the firms’ investment decision. The inflation uncertainty has a positive and significant impact on investment, providing evidence in the favor of the growth-option theory. The liquidity has a positive and significant influence, while the impact of the leverage and economic growth uncertainty is significant only under the dynamic specification. Our results are robust under different specifications of macroeconomic uncertainty and sample structure.

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Notes

  1. There are different approaches to assess the macroeconomic uncertainty. For the economic growth uncertainty, a simple way is to rely on the output gap. For the inflation uncertainty, GARCH-type models or unobserved component models can be used (Albulescu et al. 2017). For the monetary uncertainty, Husted et al. (2016) state that both survey-based and market-based approaches (i.e. CBOE Volatility Index—VIX) can be used. While most of the existing studies employ market-based indicators (Giannetti and Laeven 2016), there are also papers that rely on surveys for computing time-varying business-level uncertainty (i.e. Bachmann et al. 2013). However, a simple and accepted way to measure the uncertainty supposes the comparison between the forecasted and the recorded values of macroeconomic indicators. Deviations from initial predictions induce uncertainty in the market and in the decision making process.

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Acknowledgements

This work was supported by a Grant of the Romanian National Authority for Scientific Research and Innovation, CNCS–UEFISCDI, Project Number PN-II-RU-TE-2014-4-1760.

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Authors and Affiliations

  1. Management Department, Politehnica University of Timisoara, 2, P-ta. Victoriei, 300006, Timisoara, Romania

    Claudiu Tiberiu Albulescu, Şerban Miclea, Simina Silvana Suciu & Matei Tămăşilă

  2. CRIEF, University of Poitiers, 2 rue Jean Carbonnier, 86022, Poitiers, France

    Claudiu Tiberiu Albulescu

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  1. Claudiu Tiberiu Albulescu
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  2. Şerban Miclea
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  3. Simina Silvana Suciu
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Correspondence to Claudiu Tiberiu Albulescu.

Additional information

We thank the Associate Editor, Douglas Cumming, and two anonymous referees for insightful comments and suggestions. We are also grateful to the participants of the 21st EBES Conference held in Budapest on January 12–14, 2017.

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Albulescu, C.T., Miclea, Ş., Suciu, S.S. et al. Firm-level investment in the extractive industry from CEE countries: the role of macroeconomic uncertainty and internal conditions. Eurasian Bus Rev 8, 193–208 (2018). https://doi.org/10.1007/s40821-017-0079-3

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