Us Policy Uncertainty And Investment Sensitivity To Peers’ Stock Prices: Empirical Evidence From Vietnam
Abstract
This paper examines the spillover effect of the U.S. economic policy uncertainty (EPU) on the investment sensitivity to peers’ stock prices for a sample of 3,444 firm-year observations of listed firms in Vietnam over the period of 2008 to 2020. Employing the U.S. economic policy uncertainty index built by Baker et al. (2016) and the investment sensitivity to Tobin’s Q which is widely used in the literature as a proxy to measure the investment sensitivity to stock prices, the paper provides evidence that the U.S. EPU has no effect on the investment sensitivity to peers’ stock prices for Vietnamese listed firms. This evidence is in contrast to that for firms listed in other countries in prior studies. However, further analysis shows some support for the competition market channel. More specifically, when facing US policy uncertainty, firms in a highly competitive industríe tend to learn from their peers’ stock prices when making their investment decision. In some aspects, I provide new empirical evidence to extend the literature work on the reaction between EPU and corporate investment sensitivity to peers’ stock prices.