The U.S Trade Policy Uncertainty And Investment-To-Stock Price Sensitivity: Evidence From Australia

Abstract

ix Inspired by the considerable influence of policy uncertainty on corporate investment, albeit lacking research on its analogous impact on investment-to-stock price sensitivity, this thesis examines the associations between the latter aspect and trade policy uncertainty. The present study involves an empirical analysis utilizing data panels sourced from listed companies based in Australia, wherein the identified results indicate a noteworthy influence of trade policy uncertainty in the United States. The positive correlation between trade policy uncertainty and the responsiveness of investment to changes in stock prices is indicative. Additional analyses reveal those investment irreversibility, information asymmetry, financial constraints, and growth prospects as compounding transmission channels of this association. Concomitantly, firms may encounter stronger impact resulting from their high industry competition and external finance dependence, although the results do not support the hypothesis when employing different measures of this channel. This study supplements the limited literature surrounding the correlation between TPU and investment-to-stock price sensitivity within firms. The findings presented herein provide compelling evidence that firms rely heavily on their stock prices to mitigate any potential risks associated with policy uncertainty.