EconPapers    
Economics at your fingertips  
 

Capital Reallocation and Firm-Level Productivity Under Political Uncertainty

Daniel Tut and Melanie Cao

MPRA Paper from University Library of Munich, Germany

Abstract: Does policy uncertainty affect productivity? Policy uncertainty creates delays as firms await new information about prices, costs and other market conditions before committing resources. Such delays can have real consequences on firms’ productivity and corporate decisions. First, we find that economic policy uncertainty has a negative impact on firm-level productivity. Second, debt magnifies the adverse effects of policy uncertainty on productivity, but access to external financing during periods of significant policy uncertainty shocks has a positive impact on firm� level productivity. Third, Policy uncertainty is positively related to cash holdings but this effect is mostly driven by highly productive firms and by firms with higher levels of irreversible investments since these firms face higher opportunity costs in future states. The three findings are robust to various specifications and provide an affirmative answer to the opening question.

Keywords: Policy Uncertainty; Capital Reallocation; TFP; Leverage; Cash; Business Cycles (search for similar items in EconPapers)
JEL-codes: G0 G2 G28 G3 G31 G32 G38 (search for similar items in EconPapers)
Date: 2021-06-28
New Economics Papers: this item is included in nep-cfn, nep-eff, nep-fdg and nep-mac
References: Add references at CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/108528/1/MPRA_paper_108528.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:108528

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter (winter@lmu.de).

 
Page updated 2024-12-28
Handle: RePEc:pra:mprapa:108528