Economic policy uncertainty and sustainable financial growth: Does business strategy matter?

Using a data of 975 Chinese non-financial listed firms, this study investigates the impact of firm business strategy on sustainable financial growth during economic policy uncertainty. We use index-based measures of economic policy uncertainty, sustainable financial growth and business strategy and observe that economic policy uncertainty hurts the sustainable financial growth of Chinese firms. However, we find that a defensive business strategy positively moderates the negative impact of policy uncertainty, whereas an analytical business strategy mitigates the negative impact of policy uncertainty on sustainable financial growth. The results of the study provide guidance to corporations regarding strategy formulation to effectively deal with policy uncertainties. Our results are robust to different proxies of policy uncertainty and endogeneity issues.

Automated summary

This study examines the impact of firm business strategy on sustainable financial growth during economic policy uncertainty. The findings indicate that economic policy uncertainty negatively affects sustainable financial growth of Chinese firms. However, the defensive business strategy helps mitigate the negative impact, while the analytical business strategy alleviates the negative impact. These results provide guidance for corporations in dealing with policy uncertainties effectively.