This study examines the tendency of resource firms to overinvest induced by business cycles and uncertainties. The analysis is conducted using unbalanced panel data of 596 resource companies in 32 countries between 1986 and 2017 in four resource sectors: (1) alternative energy; (2) forestry and paper; (3) mining; and (4) oil and gas producers. The overall results suggest a positive uncertainty-overinvestment relationship. The study also finds that commodity price inflation is more important than commodity price uncertainty in inducing firms to overinvest. In addition, it finds that the home country business cycle is more prominent than the world business cycle in affecting firms’ tendency to overinvest.

Denny Irawan is a PhD student in Economics at the Centre of Applied Macroeconomic Analysis (CAMA) in Crawford School of Public Policy. His research focuses on financial cycles of natural resource companies under the influence of business cycles and commodity price cycles. He examines three financial cycles inside resource companies: (1) investment cycle; (2) leverage cycle; and (3) risk cycle. In a broader context, examining these cycles can reveal the key aspects of business sustainability of resource companies, and provide insights about their longevity. Prior to his PhD, he had six years of professional economic research and consulting experience at the Institute for Economic and Social Research at Universitas Indonesia, where he was involved mainly in two research groups: (1) Macroeconomics and Financial Sector; and (2) Regional and Energy Resources Policy. He has engaged in more than 40 research and consulting projects. He obtained his Bachelor and Master degrees in Economics at Universitas Indonesia.

The CAMA Macroeconomics Brown Bag Seminars offer CAMA speakers, in particular PhD students, an opportunity to present their work in progress in front of their peers, and reputable visitors to showcase their work.