The relevance of national culture to policy uncertainty and firm performance: European evidence

Tanveer Ahsan, Muhammad Azeem Qureshi, Ammar Gull () and Fazal Muhammad

Journal of Economic Studies, 2022, vol. 50, issue 5, 947-966

Abstract: Purpose - The purpose of this study is to investigate the impact of policy uncertainty on firm performance and to examine how the different cultural societies deal with the policy-induced uncertainty. Design/methodology/approach - The authors use data of European non-financial firms to extend the growing literature on policy uncertainty, firm performance and national culture. The authors consider financial as well as market proxies to measure firm performance and use Hofstede's cultural dimensions as a proxy for national culture. The authors apply the generalized method of moments (GMM-system) regression technique on a dataset of 702 non-financial European firms, listed during the period 2002–2018. Findings - The authors find overwhelming evidence that policy uncertainty reduces the performance of the European firms; however, cultural differences among different European countries moderate the impact of policy uncertainty on the financial as well as the market performance of the firms. The results of this study show that European cultures with high power distance, individualism, masculinity and indulgence efficiently deal with the economic policy uncertainty. While the European societies with high uncertainty avoidance fail to cope with policy-induced uncertainty. The results are robust to different regression models, alternate proxies of firm performance and endogeneity issues. Practical implications - The authors argue that policy uncertainty increases information asymmetry and decreases firm performance, therefore, the policymakers shall be considerate of the consequences of the policy-induced uncertainty in the society and business arena that would not only adversely affect the firms but also the economy. Originality/value - To the best of the authors' knowledge, this is the first study that investigates the role of national culture on the relationship between policy uncertainty and firm performance in the European context.

Keywords: Policy uncertainty; Firm performance; National culture; Hofstede; Europe; Panel data (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
Working Paper: The relevance of national culture to policy uncertainty and firm performance: European evidence (2022)
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:eme:jespps:jes-01-2022-0012

DOI: 10.1108/JES-01-2022-0012

Access Statistics for this article

Journal of Economic Studies is currently edited by Prof Mohsen Bahmani-Oskooee

More articles in Journal of Economic Studies from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().