Economic Policy Uncertainty and Firm Performance in Pakistan

Mustansar Hayat, Zulfiqar Ali, Basharat Khan and Ayesha Khero
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Mustansar Hayat: Assistant Professor, Faculty of Management Sciences, SZABIST University, Karachi, Pakistan
Zulfiqar Ali: Assistant Professor, Department of Business Administration, University of Mirpurkhas, Pakistan
Basharat Khan: Lecturer, Department of Management Sciences, Hazara University, Mansehra, Pakistan
Ayesha Khero: Student, SZABIST University, Karachi, Pakistan

Bulletin of Business and Economics (BBE), 2024, vol. 13, issue 3, 92-101

Abstract: The aim of this study is to examine the impact of economic policy uncertainty (EPU) on firm performance in Pakistan. Net profit margin (NPM) and ROE are taken as proxies for firm performance. Purposive sampling is used to collect quarterly data of 236 non-financial firms listed on Pakistan Stock Exchange (PSX) from Thomson Reuters Eikon database, as well as quarterly data on EPU and other economic indicators from World Bank database, to test the effect of EPU on firm performance in Pakistan. Using the random effects regression, we observe that economic policy uncertainty has a significant negative impact on the performance of firms in Pakistan. The results are robust in both the models with NPM and ROE as the proxies for firm performance. The findings are crucial for the firms as they need to find ways to deal with high levels of economic policy uncertainty, as well as for the policy makers that they can try to reduce the uncertainty to give a more stable economic environment to the firms operating in Pakistan.

Keywords: EPU; ROA ROE; NP; Tobin’s Q (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:rfh:bbejor:v:13:y:2024:i:3:p:92-101

DOI: 10.61506/01.00450

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