Research On The Impact Of Economic Policy Uncertainty On The Sustainability Of Enterprise Profitability

Economic policy is an important means used by the government for macro-control.In recent years,China’s economic development has made great achievements.The total GDP exceeds US $10 trillion,twice that of Japan.High-tech industries such as the Internet,new energy and aerospace have developed rapidly.However,at the same time,the imbalance and insufficiency problems faced in economic development are becoming increasingly prominent,and the problem of environmental pollution has not been solved.How to achieve the sustained,stable,healthy and sustainable development of the national economy has become the main goal of the government’s macro-control.China has promulgated one belt,one road economy policy since the 2008 financial crisis,such as the four trillion plan,China made 2025,Internet plus,cross border e-commerce and the "one belt road".These policies,though aimed at promoting China’s economic growth through macro-control,inevitably produce a by-product of economic policy uncertainty.Frequent policy changes make the uncertainty of China’s economic policy much higher than that of the United States,Japan and other countries,resulting in macroeconomic fluctuations.At the same time,it also has an impact on the operation and development of micro enterprises.Previous studies have found that economic policy uncertainty will affect the capital structure,investment and financing behavior and enterprise innovation.Will economic policy uncertainty further affect the profitability and sustainability of enterprises? How to affect the profitability and sustainability of enterprises? This paper discusses this.This paper mainly discusses the relationship between economic policy uncertainty and enterprise profitability sustainability through theoretical analysis,current situation analysis and empirical analysis.In terms of theoretical analysis,this paper mainly arranges the relevant literature from three perspectives: the impact of economic policy uncertainty on enterprise capital structure,investment and financing behavior and enterprise innovation,further analyzes the impact of economic policy uncertainty on enterprise profitability sustainability,and whether this impact is different in different characteristic enterprises,and then puts forward the research hypothesis of this paper;In terms of current situation analysis,this paper mainly compares the overall change trend of the average sustainable growth rate of Chinese enterprises and the uncertainty of economic policy from 2008 to 2019,and then preliminarily obtains the negative correlation between the uncertainty of economic policy and the sustainable development of enterprises;In terms of empirical analysis,this paper mainly explores the impact of economic policy uncertainty on the sustainability of corporate profitability by establishing an empirical model based on China’s economic policy uncertainty index and the financial data of Shanghai and Shenzhen A-share listed companies from2008 to 2019.The results show that:(1)the increase of economic policy uncertainty will inhibit the sustainability of profitability of enterprises,because when the economic policy is uncertain,enterprises will face higher business risks,more serious external financing constraints and lower innovation output level;(2)The rise of economic policy uncertainty has a stronger inhibitory effect on the profitability and sustainability of non-state-owned enterprises.The reason may be that non-state-owned enterprises are small,face greater difficulties in the financing process,and there is a gap with state-owned enterprises in information access;(3)The rise of economic policy uncertainty has a stronger inhibitory effect on the sustainability of profitability of enterprises identified as high-tech enterprises,which may be due to the volatility of high-tech enterprises’ identification policies and the phenomenon of comparison in the implementation process of various regions,resulting in the decline of the actual innovation quality of enterprises;(4)The rise of economic policy uncertainty has a stronger inhibitory effect on the sustainability of profitability of enterprises with low quality of internal control,because enterprises with low quality of internal control will not only have higher agency costs,but also have poor credit qualification and face greater financing pressure;(5)The rising uncertainty of economic policy has a stronger inhibitory effect on the sustainability of profitability of enterprises with low degree of marketization in the region.The reason is that the central and western regions with low degree of marketization are more dependent on policies and lack of perfect institutional system;(6)The rise of economic policy uncertainty has a stronger inhibitory effect on the sustainability of profitability of enterprises with high competition in their industry,because the more intense industry competition means that enterprises face greater bankruptcy risk.At the same time,compared with monopoly enterprises,enterprises with high competition in their industry do not have advantages in market possession and resource acquisition;(7)Financing constraints and enterprise innovation output play an intermediary role in the process of increasing economic policy uncertainty inhibiting the sustainability of enterprise profitability.Based on the above conclusions,this paper puts forward the following suggestions from the government level and the enterprise level: for the government,(1)when intervening in the economy through macroeconomic policies,the government should always adhere to the principle of appropriate and effective,and give better play to the decisive role of the market in resource allocation;(2)The government should maintain the continuity and consistency of economic policies and establish a more perfect policy transmission mechanism;(3)While preventing systemic financial risks,the government should also pay attention to shaping the confidence of external investors such as financial institutions and encouraging financial institutions to provide more long-term credit funds;(4)When deciding whether to adjust economic policies,the government should fully consider the impact of the heterogeneity of different industry characteristics and regional marketization degree.For enterprises,(1)enterprises should improve their internal control quality,effectively screen the captured market information and prevent the external risks faced by enterprises through a strict and complete internal responsibility division system;(2)Enterprises should improve the level of corporate governance,improve the rationality of ownership structure,and shareholders should strengthen the supervision of enterprise management;(3)Enterprises should broaden their own financing channels,actively explore diversified financing channels,and make rational use of internal financing to alleviate external financing constraints;(4)Enterprises should improve their innovation ability and improve their core competitiveness through technological innovation,management innovation,organizational innovation and cultural innovation,so as to improve the ability of enterprises to resist risks in the period of economic policy uncertainty.