 Does economic policy uncertainty aggravate financial constraints?Lewis Makosa, Sun Jie, Wellington Bonga, Moses Jachi and Lovemore Sitsha South African Journal of Accounting Research, 2021, vol. 35, issue 2, 151-166 Abstract: This paper examines the impact of economic policy uncertainty on economic growth due to its effects on firms' investment decisions, which subsequently justify firms' financial constraints. Using a sample of Chinese listed firms, the study documents that economic policy uncertainty reduce firms' financial constraints. The reduction in financial constraints stems mainly from the decrease in investments which increases the firm’s cash holding. Additional tests reveal that the reduction in firms’ financial constraints is pronounced more among non-politically connected firms compared to their counterparts. Further tests reveal that a reduction in a firms' financial constraints is of a short-term nature. In the long run, economic policy uncertainty increase firms' financial constraints. The study recommends that changes in policies must be done carefully to avoid turbulence and friction in firms’ investment decisions. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:rsarxx:v:35:y:2021:i:2:p:151-166 Ordering information: This journal article can be ordered from DOI: 10.1080/10291954.2021.1885233 Access Statistics for this article South African Journal of Accounting Research is currently edited by Soon Nel More articles in South African Journal of Accounting Research from Taylor & Francis Journals |
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