The Impact of Economic Policy Uncertainty on the Efficiency of Corporate Working Capital Management—The Evidence from China

Xi Cheng

doi:10.4236/me.2019.103054

Abstract

As China’s economic development has entered a new era, economic policy regulation has become more and more frequent. While the government transform and restructure the economic development pattern through policy regulation, the uncertainty brought by the policy also has a negative effect on the investment and operation of the private sector. However, working capital management, as an important part of enterprise operation, has received little attention. From the perspective of economic policy uncertainty, this paper uses a sample of the listed non-financial enterprises of Shanghai and Shenzhen stock markets from 2000 to 2010 to study the impact of uncertainty on the efficiency of enterprise working capital management. We found that uncertainty has a negative impact on the efficiency of working capital management.

Highlights

Since the outbreak of the financial crisis in 2008, governments have stepped up their control over their economies to avoid slowing down their economic development
The core explanatory variable economic policy uncertainty (EPU) coefficient is significantly positive at the 1% significance level, indicating that the increase in economic policy uncertainty (EPU) will make Corporate account receivable management less efficient
The core explanatory variable economic policy uncertainty (EPU) coefficient is significantly positive at the 1% significance level, indicating that the increase in economic policy uncertainty (EPU) will make corporate working capital management less efficient

Summary

Introduction

Since the outbreak of the financial crisis in 2008, governments have stepped up their control over their economies to avoid slowing down their economic development. The Fed has eased the contraction of the US credit market through continuous interest rate cuts and new liquidity tools. Japan has set up an “emergency comprehensive policy” to mitigate the impact of the shock. China launched a “four trillion” strong stimulus policy to ensure stimulate the economy. As the downward pressure on the global economic growth has increased, policy regulation has become more and more normal. Because the government’s regulation of policies has unpredictability for enterprises

Methods

Results

Conclusion