n African Finance Journal - Private investment, uncertainty, and irreversibility in Uganda




The paper uses panel data on Ugandan firms and a measure of idiosyncratic uncertainty to determine the nature of investment sensitivity to changes in perceived uncertainty among firms with different degrees of investment reversibility. Using a sample selection technique to fit a modified version of an accelerator model, the paper yielded results consistent with predictions of theories of irreversible investment. The results indicate a negative relationship between uncertainty and investment. Findings also indicate that uncertainty has a greater negative effect on investment for firms with less reversible investment.


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