Weathering the policy Storm: How trade uncertainty shapes firm financial performance through innovation and operations

Feiyun Sha, Changxu Ding, Xiaoyu Zheng, Jun Wang and Yafang Tao

International Review of Economics & Finance, 2025, vol. 102, issue C

Abstract: This study investigates how firms navigate the challenges posed by trade policy uncertainty (TPU) and how such uncertainty translates into variations in corporate financial performance (CFP). Using panel data from Chinese listed firms spanning 2011 to 2022, the analysis reveals that elevated TPU significantly impairs firm performance. The adverse effects are transmitted through two key operational mechanisms: reduced technological innovation and diminished supply chain efficiency. As firms respond to uncertain trade environments, they often cut back on long-term innovation initiatives and face logistical disruptions, both of which erode financial outcomes. Importantly, the degree of vulnerability to TPU is not uniform. State-owned enterprises and large firms exhibit greater financial stability, while firms with advanced digital capabilities demonstrate enhanced adaptability. Industry competitiveness also conditions the extent of TPU's impact. These findings offer new insights into how organizational and structural factors shape firms' ability to withstand policy-driven external shocks.

Keywords: Trade policy uncertainty; Corporate financial performance; Innovation; Supply chain efficiency; Firm resilience (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S105905602500437X
Full text for ScienceDirect subscribers only

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:eee:reveco:v:102:y:2025:i:c:s105905602500437x

DOI: 10.1016/j.iref.2025.104274

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().