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Firm‐Level Trade Policy Uncertainty and Cost Stickiness: Evidence From a Large Language Model Approach

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  • Shuyang Jia
  • Peng Liang
  • Nan Hu

Abstract

This study investigates how managers' perceived trade policy uncertainty (TPU) affects firms' cost management decisions. Adopting a firm‐level TPU measure developed by a large language model, our analysis reveals that TPU reduces cost stickiness. This effect is more pronounced in firms managed by non‐overconfident, risk‐averse, or high‐ability executives. Our results hold when we employ a series of endogeneity tests, including a coarsened exact matching method, a difference‐in‐difference approach, and an instrumental variable approach. Finally, we find that firms' cost management decisions resulting from pessimistic expectations about future sales have significant implications for firm performance.

Suggested Citation

  • Shuyang Jia & Peng Liang & Nan Hu, 2025. "Firm‐Level Trade Policy Uncertainty and Cost Stickiness: Evidence From a Large Language Model Approach," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 65(3), pages 3058-3080, September.
    • Handle: RePEc:bla:acctfi:v:65:y:2025:i:3:p:3058-3080
    DOI: 10.1111/acfi.70032
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