Economic Policy Uncertainty And Agricultural Listed Companies' Financial Decision-makings

One of the main characteristics of agriculture is that agricultural decision-making is faced with a high degree of uncertainty.The sources of agricultural decision-making uncertainty mainly include climate change uncertainty,price volatility uncertainty,and economic policy uncertainty.The effect of climate change uncertainty and price volatility uncertainty on agricultural decision-making has been extensively studied and discussed.However,the research on the effect of economic policy uncertainty on agricultural decision-making is still relatively rare.In recent years,the impact of economic policy uncertainty on economic decision-making has been paid more and more attention.This paper aims to analyze and investigate the effect of economic policy uncertainty on the financial decision-making of agricultural listed companies.This paper introduces an exposition of expected utility theory and of the notion of risk aversion.This theoretical model includes the comparative static results of some stylized models,consistent with the analysis of agricultural decision-making under risk.Then,combining with the real option theory of investment decision under uncertainty,this paper extends the basic theory to the model analysis under uncertainty of price and policy.Based on the stochastic provision and withdrawal of government subsidy,this paper investigates its effect on the optimal agricultural investment timing and the optimal investment scale.Through the construction and derivation of the theoretical model,it is found that uncertainty has a significant impact on agricultural decision-making,especially agricultural investment decision-making.Uncertainty reduces the optimal investment threshold and the corresponding optimal investment capacity.This paper estimates how economic policy uncertainty affects the agricultural decision-making by using the economic policy uncertainty index of China,which is based on the text analysis of the evaluation on economic policy uncertainty of the news and media.Based on the quarterly data of China's agricultural listed companies during 2004-2014,the main conclusions are as follows:1.According to the characteristics of uncertainty faced by agricultural listed companies when they make investment decision,and the latest development of listed companies' investment theory(especially real option theory),the results show that economic policy uncertainty reduces the investment of agricultural listed companies.Empirical results show,ceteris paribus,that the increase of one standard deviation of economic policy uncertainty causes agricultural listed companies to reduce investment by about 20%.Given that the Chinese government provide a long-term support of agricultural policy,the results show that the negative effect of economic policy uncertainty on investment of agricultural listed companies is lower than that of non-agricultural listed companies.The empirical results show that the increase of one standard deviation of economic policy uncertainty cause the reduction of investment in agricultural listed companies to be about 4%lower than that in non-agricultural listed companies.Further study shows that when the company's investment is irreversible,the rate of return on investment is high,the company is not diversified and the company is non-state company,the difference between the effects of the economic policy uncertainty on investment in agricultural listed companies and in non-agricultural is significantly greater.2.According to the characteristics of uncertainty faced by agricultural listed companies when they make capital structure decision,and the latest development of capital structure theory of listed companies,the results show that economic policy uncertainty reduces the leverage of agricultural listed companies.Empirical results show,ceteris paribus,that the increase of one standard deviation of economic policy uncertainty causes agricultural listed companies to reduce leverage by about 25%.Given that the effect of China's agricultural policy,the results show that the negative effect of economic policy uncertainty on leverage of agricultural listed companies is lower than that of non-agricultural listed companies.The empirical results show that the increase of one standard deviation of economic policy uncertainty cause the reduction of leverage in agricultural listed companies to be about 7%lower than that in non-agricultural listed companies.Further study shows that when the company does not have bank connection,is from regions with lower degrees of marketization,is older and is non-state company,the difference between the effects of the economic policy uncertainty on leverage in agricultural listed companies and in non-agricultural is significantly greater.3.According to the characteristics of uncertainty faced by agricultural listed companies when they make tax avoidance decision,and the latest development of tax avoidance theory of listed companies,the results show that economic policy uncertainty increases the tax avoidance of agricultural listed companies.Empirical results show,ceteris paribus,that the increase of one standard deviation of economic policy uncertainty causes agricultural listed companies to increase tax avoidance by about 5%.Given that the effect of China's agricultural policy,the results show that the positive effect of economic policy uncertainty on tax avoidance of agricultural listed companies is lower than that of non-agricultural listed companies.The empirical results show that the increase of one standard deviation of economic policy uncertainty cause the increase of tax avoidance in agricultural listed companies to be about 12%lower than that in non-agricultural listed companies.Further study shows that when the company's cash flow uncertainty is high,the company's price-cost margin is high,the political uncertainty is high and it is non-state company,the difference between the effects of the economic policy uncertainty on tax avoidance in agricultural listed companies and in non-agricultural is significantly greater.4.According to the characteristics of uncertainty faced by agricultural listed companies when they make cash holding decision,and the latest development of cash holding theory of listed companies,the results show that economic policy uncertainty increases the cash holding of agricultural listed companies.Empirical results show,ceteris paribus,that the increase of one standard deviation of economic policy uncertainty causes agricultural listed companies to increase cash holding by about 70%.Given that the effect of China's agricultural policy,the results show that the positive effect of economic policy uncertainty on cash holding of agricultural listed companies is lower than that of non-agricultural listed companies.The empirical results show that the increase of one standard deviation of economic policy uncertainty cause the increase of cash holding in agricultural listed companies to be about 8%lower than that in non-agricultural listed companies.Further study shows that when the degree of corporate financing constraint is high,the company's growth opportunity is good,the company's ability of learning is weak and it is non-state company,the difference between the effects of the economic policy uncertainty on cash holding in agricultural listed companies and in non-agricultural is significantly greater.The conclusion of the study will help the Chinese economic policy-making institutions to understand the mechanism and the degree of the effect of economic policy uncertainty on the agricultural decision,and provide a reference for the economic policy-making institutions to optimize the formulation of economic policies.Moreover,the empirical evidence of the relationship between economic policy uncertainty and agricultural decision-making in China,which is the largest developing country,also provides reference for economic policy formulation of other developing countries.For the decision-makers of agricultural listed companies,corporate agriculture or family farms,this study will help them to optimize agricultural investment and financing decisions in the face of economic policy uncertainty and rationally allocate agricultural resources to obtain better performance.This paper provides a reference for them to develop the optimal decision-making by the analysis and empirical test of the constraints conditions of economic policy uncertainty on agricultural decision-making.In this paper,the analysis and empirical test of agricultural listed companies will help the broad capital market participants to make reasonable pricing to the company,which is of practical importance to improve the efficiency of capital market and optimize the allocation of resources.