POLITICAL UNCERTAINTY AND FIRM INVESTMENT CONNECTION

The current study aims to examine the relationship between political uncertainty and investment behavior of listed firms in Pakistan. To empirical investigation is done by using Prime Ministership and presidential elections of Pakistan as a source of plausibly exogenous variation in uncertainty. To establish the empirical status of the hypotheses, secondary data of 70 non-financial firms is collected for 10 years i.e. 2008 to 2017. Generalized Method of Moments (GMM) has been applied to address the problem of endogeneity. Results depict decline in investment before elections period. Further it provides evidence that political uncertainty influence the firms ‘investment behavior and postponed equity and debt issuances before elections. The study is beneficial and source of awareness for regional and international investors, bankers, fund Managers, decision makers, researchers and academia towards portfolio diversification and exploit investment opportunities.