Economic policy uncertainty and firm performance

ABSTRACT

This study examines the relationship between economic policy uncertainty (EPU) and firm performance of the US-listed non-financial firms. Using four proxies of firm performance such as Return on Assets, Return on Equity, Net Profit Margin and Tobin’s Q, we find that the effect of EPU on firm performance is significant and negative on all four proxies. System-GMM estimation is used to address the problem of endogeneity because unreported results show the presence of heteroscedasticity and autocorrelation in OLS and fixed effect estimations.

KEYWORDS:

• Economic policy uncertainty
• firm performance
• system-GMM
• financial constraints

JEL CLASSIFICATION:

• D80
• G30
• D21

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The data of rule of law and regulatory quality can be found on https://info.worldbank.org/governance/wgi/#home and these variables are not dummy variables.

² For definition and measurements of variables..