3. Economic Policy Uncertainty

This chapter explores how economic policy uncertainty influences firm performance in China, focusing on investment, employment, and revenue. The study highlights the differing impacts on state-owned and non-state-owned enterprises, revealing that state-owned enterprises are less affected due to their resource advantages and government support. The research identifies three main mechanisms through which economic policy uncertainty affects firm performance: risk-taking, cash holdings, and tax burden. Additionally, the study examines the heterogeneous effects of economic policy uncertainty before and after anti-corruption measures and in developed versus less developed regions. The findings suggest that economic policy uncertainty negatively impacts firm performance, but this effect is mitigated for state-owned enterprises. The study concludes by discussing the implications of these findings for policy-makers and firms, emphasizing the importance of understanding the distinct behaviors of different types of enterprises in the context of economic policy uncertainty.