Enterprise Sustainability: Economic Policy Uncertainty, Enterprise Investment, and Profitability

Aijun Guo, Haiqi Wei, Fanglei Zhong, Shuangshuang Liu and Chunlin Huang
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Aijun Guo: School of Economics, Lanzhou University, Lanzhou 730000, China
Haiqi Wei: School of Economics, Lanzhou University, Lanzhou 730000, China
Fanglei Zhong: School of Economics, Lanzhou University, Lanzhou 730000, China
Shuangshuang Liu: School of Management, Lanzhou University, Lanzhou 730000, China
Chunlin Huang: Northwest Institute of Eco-Environment and Resources, Chinese Academy of Sciences, Lanzhou 730000, China

Sustainability, 2020, vol. 12, issue 9, 1-22

Abstract: Under economic fluctuations, the sustainable development of enterprises is crucial. Currently, there are few studies on the interaction between economic policy uncertainty (EPU) and the sustainable development behavior of enterprises. Based on a panel vector autoregressive (PVAR) model, this paper explores the static and dynamic interactions among EPU, enterprise investment, and enterprise profitability and then analyzes regional heterogeneity in these factors. It finds that EPU has an inhibitory effect on the investment and profitability of enterprises, while the investment and profitability of enterprises also have an inhibitory effect on EPU. In addition, there are contribution differences and regional differences in the degrees of influence of the three factors. In the long run, EPU and the inhibition of enterprise investment and profitability are strongest in China’s central region. The results show that the stronger the certainty of economic policy, the more conducive this policy is to promoting enterprise investment behavior and improving enterprise profitability. Therefore, to ensure normal economic development, the government should limit changes in economic policy as much as possible; doing so is critical for promoting investment behavior and improving the profitability of enterprises.

Keywords: economic policy uncertainty; investment; profitability; regional diversity; China (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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