INVESTMENT DECISIONS AND FIRM PERFORMANCE UNDER ECONOMIC POLICY UNCERTAINTY

AbstractThe aim of this paper is to investigate the effect of economic policy uncertainty on firms’ investment decisions. We focus on Spain for the period 1998–2014. To measure policy-related uncertainty, we borrow the economic policy uncertainty (EPU) indicator available for this country. We find strong evidence that uncertainty reduces corporate investment. This relationship appears to be nonlinear, being the marginal effect of uncertainty attenuated toward zero during periods of high uncertainty levels. Furthermore, the heterogeneous results suggest that the adverse effect of uncertainty is particularly relevant for highly vulnerable firms. Overall, these results are consistent with the hypotheses that economic policy-related uncertainty reduces corporate investment through increases in precautionary savings or to worsening of credit conditions.

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Impact of US Economic Policy Uncertainty on Geopolitical Risk. Evidence from BRIC Economies

Pénzügyi Szemle = Public Finance Quarterly ◽

10.35551/pfq_2020_4_3 ◽

2020 ◽

Vol 65 (4) ◽

pp. 485-496

Author(s):

Imtiaz Arif ◽

Amna Sohail Rawat ◽

Muhammad Shahbaz

Keyword(s):

Economic Policy ◽

Financial Market ◽

Investment Decisions ◽

Policy Uncertainty ◽

Estimation Technique ◽

Economic Policy Uncertainty ◽

Bric Countries ◽

The Us ◽

Asymmetric Relation ◽

The Relationship

This paper estimates the relationship between US economic policy uncertainty and geopolitical risk in the BRIC economies.1 Due to the assumption of a non-linear and asymmetric relation between US economic policy uncertainty and geopolitical risk of BRIC countries, a nonparametric estimation technique, Quantile on Quantile approach has been used for empirical analysis. The empirical results revealed that the relationship between the US economic policy uncertainty and geopolitical risk of BRIC economies is heterogeneous in nature. We noted that economic policy uncertainty in the US is negatively related to geopolitical risk in Chinese and Russian economies. However, for Indian and Brazilian economies US economic policy uncertainty is positively related to geopolitical risk. The outcomes of the study will be helpful for the investors and financial market players for taking investment decisions. It will also benefit the legislators and policymakers in making policies that could make their respective economies insulated from foreign policy risks.

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Economic policy uncertainty and firm performance

Applied Economics Letters ◽

10.1080/13504851.2019.1645272 ◽

2019 ◽

Vol 27 (10) ◽

pp. 765-770 ◽

Cited By ~ 6

Author(s):

Umer Iqbal ◽

Christopher Gan ◽

Muhammad Nadeem

Keyword(s):

Economic Policy ◽

Firm Performance ◽

Policy Uncertainty ◽

Economic Policy Uncertainty

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Economic policy uncertainty and firm performance: evidence from China

Journal of the Asia Pacific Economy ◽

10.1080/13547860.2021.1962643 ◽

2021 ◽

pp. 1-18

Author(s):

Xinge Feng ◽

Weijie Luo ◽

Yong Wang

Keyword(s):

Economic Policy ◽

Firm Performance ◽

Policy Uncertainty ◽

Economic Policy Uncertainty

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Understanding the effects of economic policy uncertainty on US tourism firms’ performance

Tourism Economics ◽

10.1177/1354816620983148 ◽

2021 ◽

pp. 135481662098314

Author(s):

Conrado Diego García-Gómez ◽

Ender Demir ◽

Ming-Hsiang Chen ◽

José María Díez-Esteban

Keyword(s):

Economic Policy ◽

Firm Performance ◽

Negative Impact ◽

Generalized Method Of Moments ◽

High Growth ◽

Policy Uncertainty ◽

Tobin’S Q ◽

Tobin's Q ◽

Economic Policy Uncertainty ◽

The Impact

This study analyzes the impact of economic policy uncertainty (EPU) on the performance of US tourism firms using a sample of 296 publicly traded tourism companies from 2000 to 2018 with a sample of 3068 firm-year observations. Estimation results of panel regressio tests based on the system-generalized method of moments indicate that EPU has a negative impact on return on assets (ROA), return on equity (ROE), and Tobin’s Q. Our results are consistent for different variable specifications. We also find that firm size and leverage play a moderating role in the relationship between EPU and firm performance. Panel quantile regression results show that the impact of EPU on US tourism firm performance is asymmetric. Specifically, low-performing (25% quantile of ROA and ROE) firms are less affected by EPU, and for the case of Tobin’s Q, EPU does not affect firms with a high growth opportunity (100% quantile of Tobin’s Q).

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