Economic policy uncertainty, COVID-19 and corporate investment: Evidence from the gold mining industry

• Published in: Resources policy 2023-08, Vol.85, p.103787, Article 103787
• Main Authors: Klayme, Tania, Gokmenoglu, Korhan K., Rustamov, Bezhan
• Format: Article
• Language: English
• Subjects: Corporate investment; Economic policy uncertainty; GMM; Gold mining industry
• ISSN: 0301-4207; 1873-7641
• DOI: 10.1016/j.resourpol.2023.103787

Mining is a capital-intensive sector that requires substantial upfront investments and continuous capital expenditure to sustain and improve production. This study investigates the impact of Economic Policy Uncertainty (EPU) on the investment decisions of the top 5 gold mining countries, namely Australia, China, Russia, the USA, and Canada, with a focus on the COVID-19 Pandemic. Using a two-step generalized method of moments, we analyze data from 333 gold mining companies from 2006 to 2021. Our results demonstrate that the EPU index has a negative effect on the investment decisions of gold mining companies during the COVID-19 Pandemic. We also utilize quantile regression analysis, which shows that the estimated coefficients for the low and high quantiles are significant. Our study reveals that during periods of uncertainty, gold mining companies tend to be risk-averse, which subsequently dampens investment projects. Furthermore, the capital-intensive nature of the gold mining sector renders companies to be more vulnerable to economic conditions. These findings have significant policy implications for investors, portfolio managers, and policymakers, which will be discussed in the conclusion section. •The critical effects of the gold industry on the global economy provided a great interest in investigating how the gold mining companies make investment decisions under uncertainty.•The Economic Policy Uncertainty (EPU) index was used as a proxy to represent uncertainty.•The companies among the top 5 gold mining countries were selected for the study. The results revealed a significant inverse relationship between EPU and corporate investment in the gold mining sector.•Our study showed that the COVID-19 period has a lower impact on the relation between EPU and corporate investment in the gold mining sector.•Our study is the first to examine the impact of EPU on gold mining investment decisions. The results aim to help the company's managers to understand the corporate investment better.