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This study aims to examine the role of economic political uncertainty (EPU) on various corporate policies, namely, cash reserves, investment, capital structure and operating activities of Indian listed firms.

To assess the influence of policy-related uncertainties, the author uses the India-specific EPU news-based index constructed by Baker et al. (2016) as a proxy for policy uncertainties. This study uses data from listed Indian firms spanning the period 2003 to 2019. The author uses panel regression models with firm-fixed effects to analyze the impact of EPU on corporate policies, including cash reserves, leverage and CAPEX, while considering key control variables.

In response to heightened EPU, firms tend to increase their cash reserves, curtail their investment activities and favour secured financing options. Notably, this study aligns with the “real options” framework, demonstrating that firms with substantial investment irreversibility significantly reduce their capital expenditures during periods of elevated EPU. Additionally, the results reveal that rising EPU corresponds to heightened borrowing costs and increased operating expenses for firms.

In contrast to prior research that predominantly investigated the impact of EPU on the decisions of listed firms in developed markets, this study delves into the role of EPU on corporate policies among listed firms in India. This focus is particularly relevant, given the significant policy changes that have transpired in the Indian business landscape in recent years.

This study aims to theoretically hypothesize and empirically examine the impact of economic policy uncertainty (EPU) on firms' innovation performance as well as the contingency conditions of this relationship.

This study collects and combines secondary longitudinal data from multiple sources to test for a direct impact of EPU on firms' innovation performance. It further examines the moderating effects of firms' operational and marketing capabilities. A series of robustness checks are performed to ensure the consistency of the findings.

In contrast to the common belief that EPU reduces the innovativeness of firms, the authors find an inverted-U relationship between EPU and innovation performance, indicating that a moderate level of EPU actually promotes innovation. Further analysis suggests that firms' operational and marketing capabilities make the inverted-U relationship steeper, further enhancing firms' innovation performance at a moderate level of EPU.

This study adds to the emerging literature that investigates the operational implications of EPU, which enhances our understanding of the potential bright side of EPU and broadens the scope of operational risk management.

Introduction: Uncertainty plays an important role on economic stability and macroeconomic variables. Economic agents postpone decisions about investment and consumption in periods in which uncertainty is high. This situation affects economic growth negatively. Recently, uncertainty has focused on policy uncertainty. At this point, economic policy uncertainty (EPU) comes to the forefront. EPU is defined as conception that economic agents do not forecast consequences of economic policies adopted by policy makers and future economic policies. In terms of developing countries, statements presented by policy makers in the United States especially may appear as a source of uncertainty in developing economies.

Aim: Therefore, the aim of this study is to analyze the effects of US EPU on macroeconomic variables for Turkey and Brazil, Russia, India, China and South Africa for periods in which global risk perception is low and high.

Method: The authors used monthly data from January 1998 to December 2018. For this purpose, the authors used Threshold VAR. VIX index takes in consideration as global risk perception. The authors used US EPU index proposed by Baker’s vd. (2016) in order to measure EPU in the United States. Besides, the authors used macroeconomic variables such as industrial production index, inflation and exchange rate.

Findings: As is seen from the results of the analysis, for Turkey’s economy the macroeconomic variables significantly and strongly respond to the changes in the EPU index during the periods in which global risk perception is low; nonetheless, the so-called responses weaken due to the adopted policy of “wait and watch” by investors during the periods in which global risk perception is high.

This chapter tests the market risk and economic policy uncertainty (EPU) of five Asian stock market returns and finds positive and significant intertemporal relations between excess stock returns and conditional volatility/downside risk. The results support positive risk-return relations across five Asian markets after controlling for the lagged dividend yield and the change in EPU ( Δ EPU). The evidence strongly indicates that excess stock returns are negatively correlated with the Δ EPUs. This finding holds true not only for the domestic market but also for external sources. The negative effect of Δ EPU is more profound from the US and global markets as compared with those from the Europe, Japanese, and domestic markets and suggests that a pathway to forming an optimal strategy for portfolio risk management depends on developing an effective hedging strategy against the impact of Δ EPUs from US/global markets.

This chapter examines the impact of economic policy uncertainty (EPU) on bank profitability, using a sample of US banks from 2001 to 2016. We find a robust negative relationship between the aggregate level of policy uncertainty and bank profitability. The channel analysis shows that policy uncertainty can significantly reduce loan growth and increase the nonperforming loan ratio. More importantly, we find critical evidence that bank capital can improve the impact of policy uncertainty on the bank's economic performance and operation. Overall, this chapter has an important policy implication: policymakers can reduce the adverse effect of policy uncertainty on the banking industry through measures to stabilize bank capital adequacy.

To investigate the role of domestic and foreign economic policy uncertainty (EPU) in driving the corporate bond yields in emerging markets.

The study utilizes monthly data from January 2008 to June 2023 from the selected emerging economies. The data analysis is conducted using univariate, bivariate and multivariate statistical techniques. The study includes bond market liquidity and global volatility (VIX) as control variables.

Domestic EPU has a significant role in driving corporate bond yields in these markets. The study finds weak evidence to support the role of the USA EPU in influencing corporate bond yields in emerging economies. Domestic EPU holds more weight and influence than the EPU originating from the United States of America.

The findings provide useful insights to policymakers about the potential impact of policy uncertainty on corporate bond yields and enable them to make informed decisions regarding economic policies that maintains financial stability. Understanding the relationship between EPU and corporate bond yields enables investors to optimize their investment decisions in emerging market economies, opens the scope for further research on the interaction between EPU and volatility and other attributes of fixed income markets.

Focuses specifically on the emerging market economies in Asia, providing an in-depth analysis of the dynamics and challenges faced by these countries, Explores the influence of both domestic and the USA EPU on corporate bond yields in emerging markets, offering valuable insights into the transmission channels and impact of EPU from various sources.

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.

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.

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.

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.