The impact of economic policy uncertainty on manager sentiment: evidence from Chinese non-financial listed firms

ABSTRACT

In this study, we investigate the link between economic policy uncertainty (EPU) and manager sentiment. Analysing a comprehensive dataset of Chinese non-financial listed firms spanning from 2007 to 2021, the findings indicate a negative relationship between EPU and manager sentiment expressed in annual reports. Additionally, we observed a significant reduction in manager sentiment bias in the presence of high EPU. The impact of EPU on manager sentiment is moderated by firms benefiting from government industrial policy and those exhibiting stronger risk-taking capability, as the negative effect is less pronounced in these cases. Our channel analysis reveals that EPU diminishes manager sentiment by impairing operating performance and capital market performance.

KEYWORDS:

• Economic policy
• manager sentiment
• financial report
• firms
• China

JEL CLASSIFICATION:

• G14
• G18
• G34

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

Data are available on request from the corresponding author.

Additional information

Funding

The study is financially supported by the Humanities and Social Sciences Foundation of the Ministry of Education of China (20YJC630097) and the Taishan Scholar Foundation of Shandong Province, China (tsqn202103070).