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Economic Policy Uncertainty and Firm Performance in Pakistan

Author

Listed:
  • Mustansar Hayat

    (Assistant Professor, Faculty of Management Sciences, SZABIST University, Karachi, Pakistan)

  • Zulfiqar Ali

    (Assistant Professor, Department of Business Administration, University of Mirpurkhas, Pakistan)

  • Basharat Khan

    (Lecturer, Department of Management Sciences, Hazara University, Mansehra, Pakistan)

  • Ayesha Khero

    (Student, SZABIST University, Karachi, Pakistan)

Abstract

The aim of this study is to examine the impact of economic policy uncertainty (EPU) on firm performance in Pakistan. Net profit margin (NPM) and ROE are taken as proxies for firm performance. Purposive sampling is used to collect quarterly data of 236 non-financial firms listed on Pakistan Stock Exchange (PSX) from Thomson Reuters Eikon database, as well as quarterly data on EPU and other economic indicators from World Bank database, to test the effect of EPU on firm performance in Pakistan. Using the random effects regression, we observe that economic policy uncertainty has a significant negative impact on the performance of firms in Pakistan. The results are robust in both the models with NPM and ROE as the proxies for firm performance. The findings are crucial for the firms as they need to find ways to deal with high levels of economic policy uncertainty, as well as for the policy makers that they can try to reduce the uncertainty to give a more stable economic environment to the firms operating in Pakistan.

Suggested Citation

  • Mustansar Hayat & Zulfiqar Ali & Basharat Khan & Ayesha Khero, 2024. "Economic Policy Uncertainty and Firm Performance in Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(3), pages 92-101.
    • Handle: RePEc:rfh:bbejor:v:13:y:2024:i:3:p:92-101
    DOI: https://doi.org/10.61506/01.00450
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    Keywords

    EPU; ROA ROE; NP; Tobin’s Q;
    All these keywords.

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