Firm-Level Political Uncertainty and Corporate Financial Policies

Abstract

Political events across countries have significant effects on corporate financial policies. Literature suggest that not only aggregate political uncertainty matters, but also at the firm level. Political risk indexes and data from public firms in the U.S. between 2002 and 2019 resulting in 117,049 firm-quarter observations are employed in empirical estimations of investment and cash holdings as dependent variables. Results show that the effect of firm-level policy uncertainty on investment is sensitive to the statistical model and that cash holdings is positively correlated to firm-level political uncertainty.