Economic policy uncertainty and firm value: the mediating role of intangible assets and R&D

ABSTRACT

We explore the mechanisms by which intangible assets and R&D intensity mediate the relationship between global economic policy uncertainty and firm value. We find that firms in high intangible-intensity industries and those engaging in R&D suffer the most from restrictive governance policies when economic instability is high. However, when the economic environment is volatile, these same firms benefit the most from prior investments in corporate social responsibility. Results add nuance to prior literature exploring the CSR and corporate governance strictly during the Great Recession and also shed light on optimal governance and CSR policies in times of global economic policy uncertainty.

KEYWORDS:

• Economic policy uncertainty
• firm value
• intangible assets
• research and development

JEL CLASSIFICATION:

• G28
• G32
• G34
• G38

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Intangible asset intensity is as defined in Peters and Taylor (2017); see Data section below.

² Positive-R&D firms are those reporting greater-than-zero research and development expenditures.

³ In untabulated results (available upon request) we find that regardless of the firm’s corporate governance score, GEPU_t*CSR_t-1 is positive and significant for firms operating in high intangible intensity industries. However, no matter whether the firm’s corporate governance score is high or low, GEPU_t*CSR_t-1 is insignificant for firms in low intangible intensity industries. These findings add robustness to our results and corroborate that prior CSR investments broadly serve to offset disruptions in economic stability for firms high-intangible-intensity firms. We thank an anonymous referee for suggesting this analysis.

Additional information

Funding

Kiyoung Chang appreciates the financial support from Faculty Summer Research Grant from University of South Florida [000390446].