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Policy uncertainty effects under different ownership structures: An asymmetric analysis

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  • Zheng, Shilong
  • Dong, Qi
  • Lin, Yunshi

Abstract

This study examines how firm-level exposure to economic policy uncertainty (EPU) affects corporate practices in China. Using a return-based beta approach, we construct a firm-level EPU measure considering firms’ investment, leverage, and valuation outcomes. Results reveal that higher EPU significantly reduces investment, lowers leverage, and decreases market valuation across all firms. Ownership structure shapes the intensity of these effects as nonstate-owned enterprises experience sharper valuation losses and deleveraging, likely attributable to limited financial buffers. In contrast, state-owned enterprises show greater investment cuts, indicating stronger responsiveness to political signals. These findings highlight how institutional context modulates corporate reactions to EPU. This study provides new evidence from Chinese listed firms and valuable insights into how firms navigate external shocks under divergent governance regimes.

Suggested Citation

  • Zheng, Shilong & Dong, Qi & Lin, Yunshi, 2026. "Policy uncertainty effects under different ownership structures: An asymmetric analysis," Finance Research Letters, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:finlet:v:91:y:2026:i:c:s1544612325026224
    DOI: 10.1016/j.frl.2025.109373
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