How Do Uncertainty Shocks Affect Corporate Cross-Border Capital Flows? Evidence from Monetary Policy Uncertainty

This study examines the impact of monetary policy uncertainty (MPU) on corporate cross-border capital flows using data from Chinese A-share listed firms during 2007–2023. A two-way fixed effects model with firm and time trend terms is employed, complemented by robustness checks, instrumental variable estimation, and alternative specifications. The results show that MPU significantly reduces firms’ cross-border capital flows. This finding remains robust after controlling for firm characteristics, excluding special years, adjusting fixed effects, lagging explanatory variables, and applying alternative estimation methods. Mechanism analysis reveals that MPU operates not only through direct channels but also indirectly by narrowing overseas business layout, lowering external market dependence, and weakening internal quality control. Moderation analysis indicates that corporate responsiveness mitigates the negative effect of MPU, whereas lower industry competition and higher foreign ownership amplify it. These findings suggest that policy uncertainty can reshape firms’ international capital allocation through multiple channels, with effects varying across firm characteristics. The results highlight the importance of improving monetary policy transparency to stabilize firms’ investment expectations and the need for firms to strengthen governance, maintain resilient global networks, and manage market dependencies to withstand external shocks. This study contributes to understanding the interaction between macroeconomic policy uncertainty and corporate globalization strategies in emerging markets.