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State-level economic policy uncertainty (EPU) and firm financial stability: Is there any political insurance?

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  • Alam, Ahmed W.
  • Farjana, Ashupta
  • Houston, Reza

Abstract

We examine the impact of state-level EPU (SEPU) on firm financial stability. SEPU erodes financial stability, regardless of firm size. Political connections moderate this effect, supporting the political insurance hypothesis. Stronger political ties reduce firm sensitivity to SEPU increases.

Suggested Citation

  • Alam, Ahmed W. & Farjana, Ashupta & Houston, Reza, 2023. "State-level economic policy uncertainty (EPU) and firm financial stability: Is there any political insurance?," Economics Letters, Elsevier, vol. 225(C).
    • Handle: RePEc:eee:ecolet:v:225:y:2023:i:c:s0165176523000526
    DOI: 10.1016/j.econlet.2023.111027
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    References listed on IDEAS

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    Cited by:

    1. Bai, Yiran & Tang, Shichao & Lu, Chunxian & Chen, Beier & Yan, Minghui, 2023. "Economic policy uncertainty and natural resource policy in the United States," Resources Policy, Elsevier, vol. 83(C).

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    More about this item

    Keywords

    State-level EPU; Firm stability; Political connection; PAC contribution; Lobbying;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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