Corporate investment policy and currency value in asean-5 countries: Firm level analysis for 2001–2014

This study analyzes the response of corporate investment to exchange rate movements in five ASEAN (ASEAN-5) countries. A theoretical framework is proposed for the real exchange rate, which affects corporate activities through at least three channels: revenue (exports), imported in-puts, and imported finished goods. Estimations using dynamic panel data based on quarterly data (2001Q1–2014Q4) from 859 manufacturing corporations support the hypotheses. The results sup-port the revenue channel for manufacturing in Indonesia, Malaysia, and the Philippines. Hence, depreciation is expected to increases sales, leading to increased corporate investment. The revenue channel in Singaporean manufacturing was significant after separating the penetration of low im-ported finished goods from that of high. Because exporter companies are also simultaneously big importers of inputs, the imported inputs channel generally increases corporate investment. In ad-dition, the additional cost of imported inputs remains smaller than the additional gain from exports. The imported finished-goods channels demonstrate that the less imported finished-goods penetra-tion the greater the impact of currency value on corporate investment. Research on investments and exchange rates is rare in the Southeast Asian context. Therefore, this paper contributes to the literature by analyzing the transmission mechanism of the impact of exchange rate movements on corporate investments.