Economic policy uncertainty and firm performance: Evidence from the energy-intensive industry in China

As a result of high energy consumption and pollution from energy-intensive industries, the Chinese government has implemented a series of policies. A comprehensive assessment of these policies is necessary to guide the green transformation and upgrading of the industry, however, little research has been conducted on this issue. This article takes China's economic policy uncertainty (EPU) Index as a comprehensive and continuous policy shock and investigates the impact of EPU on the financial performance of energy-intensive firms. Based on 289 listed energy-intensive companies from 2003 to 2018, we find that EPU negatively affects the financial performance of firms, and the negative effect is robust after replacing the dependent variable and endogenous discussion. Further, the negative impacts are more pronounced for midwestern, non-SOE firms, as well as ferrous metal and chemical product manufacturers. Moreover, our results indicate that the negative impact of EPU on performance is mitigated for firms with high cash holdings and low debt ratios.