Macro-management policies: A supporting role to company' capital expenditure

This article studies the empirical impact of Foreign Assets Management (FAM) on companies' capital expenditure in emerging market economies with International Financial Shocks (IFS). The empirical analysis uses annual data of 2931 publicly listed companies in 45 emerging market economies from 2000 to 2019. We analyzed a multiplicative regression of a canonical capital expenditure Q model. The findings show that FAM positively affects companies' capital expenditure. Moreover, financially restricted companies are more sensitive to the favourable impact of FAM compared to restricted companies. Our results highlight the relevance of considering companies' heterogeneity when examining the effect of macro-management policies. In addition, FAM has a more favourable impact on companies' capital expenditure in economies that concurrently use capital controls and macroprudential policy. Finally, our findings suggest that successful macro-management policies insulate capital expenditure from adverse IFS. This result highlights the role of more coordinated approaches to repel adverse international shocks.

Automated summary

This article examines the impact of Foreign Assets Management (FAM) on companies' capital expenditure in emerging market economies with International Financial Shocks (IFS). The findings suggest that FAM has a positive effect on capital expenditure, especially for financially restricted companies. The study highlights the importance of considering companies' heterogeneity and the concurrent use of capital controls and macroprudential policy. Successful macro-management policies can mitigate the adverse impact of international financial shocks on capital expenditure.