Asset redeployability, sustainability, and managerial prudence: evidence from economic policy uncertainty

Pattanaporn Chatjuthamard, Suwongrat Papangkorn, Pornsit Jiraporn and Piyachart Phiromswad

International Journal of Accounting & Information Management, 2023, vol. 32, issue 1, 100-121

Abstract: Purpose - The purpose of this study is to shed light on the impact of economic policy uncertainty (EPU) on asset redeployability. Capitalizing on a novel measure of asset redeployability, the authors explore the effect of economic policy uncertainty (EPU) on redeployable assets using a unique text-based measure of EPU. Asset redeployability is an important aspect of sustainability that has been largely overlooked. More redeployable assets can be repurposed for a variety of uses, lessening the necessity for new products and thus conserving natural resources. Design/methodology/approach - In addition to the standard regression analysis, the authors execute a variety of robustness checks, i.e. propensity score matching, entropy balancing, instrumental-variable analysis, GMM dynamic panel data analysis and use Oster’s (2019) approach for testing coefficient stability. Importantly, the authors incorporate firm fixed effects in the analysis, which helps mitigate endogeneity due to unobservable firm characteristics. Findings - Based on an immense sample of over 200,000 observations over three decades, the results reveal that greater uncertainty raises asset redeployability significantly. The findings corroborate the managerial prudence hypothesis. The future deployment of assets is less predictable in times of increased uncertainty. Consequently, during uncertain times, it is more prudent to have assets that can be redeployed for multiple purposes. Originality/value - To the best of the authors’ knowledge, this is the first study to explore the impact of EPU on asset redeployability, which is a critical aspect of sustainability that has rarely been investigated in the literature. The authors fill this important void in the literature. The authors extend the literature in EPU, asset redeployability as well as sustainability.

Keywords: Asset redeployability; Redeployable assets; Economic policy uncertainty; EPU; Asset specificity; Investment irreversibility; Q56; G30; G31; G32 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijaimp:ijaim-05-2023-0126

DOI: 10.1108/IJAIM-05-2023-0126

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