Purpose – This study aims to investigate whether firms purchase directors’ and officers’ liability (D&O) insurance when the country-level economic policy uncertainty (EPU) is high. Design/methodology/approach – This study uses D&O insurance data from Chinese listed firms between 2003 and 2019 to conduct regression analyses to examine the association between D&O insurance and EPU. Findings – The results show that government EPU, despite being an exogenous factor, increases the likelihood of firms’ purchasing D&O insurance, and this effect is more pronounced when firms are exposed to great share price crash risk and high litigation risk, suggesting that firms intend to purchase D&O insurance possibly due to the accentuated stock price crash risk and litigation risk associated with EPU. In addition, the results indicate that the effect of EPU on the D&O insurance purchase decision is moderated by the provincial capital market development and internal control quality. Practical implications – The study highlights the role of uncertain economic policies in shareholder approval of D&O insurance purchases. Originality/value – The study enriches the literature on the determinants of D&O insurance purchases by documenting novel evidence that country-level EPU is a key institutional factor shaping firms’ decisions to purchase D&O insurance.

Owing to the liberalisation of financial markets, the impact of international capital flows on the Chinese stock market has become substantial. This study investigates the effects of economic policy uncertainty (EPU), geopolitical risk (GPR), consumer sentiment (CCI), macroeconomic fundamentals (MECI), and money supply (M2) on the correlations between the stock and exchange rate markets. The negative correlation between these two markets has become more pronounced in recent years. Moreover, EPU, GPR, CCI, and MECI negatively impact long-term stock-exchange rate correlations, while M2 has a positive impact. Portfolios of stock-exchange rates effectively reduce risk, especially when considering structural breaks.

This study investigates how economic policy uncertainty (EPU) affects venture capital (VC) contract terms. Using a unique database of contracts between VCs and entrepreneurial firms in China, we provide evidence that VCs include more investor-friendly covenants in contracts when EPU increases. Our findings hold across a battery of robustness checks, including addressing endogeneity concerns and using alternative EPU measures. Our mechanism analysis shows that higher investment risk and increased VCs’ bargaining power might be plausible reasons why EPU positively affects the presence of investor-friendly covenants in VC contracts.

In recent decades, over 40% of dollar-denominated corporate bonds have been issued by non-US firms. Strikingly, these foreign issuers face an extra discount of 20 bps than their US counterparts. While standard risks fail to account for the discount, the Economic Policy Uncertainty index from Baker, Bloom, and Davis (2016) can explain a substantial portion of this discrepancy, consistent with uncertainty-based model calibrations. Moreover, such foreign discount (USA effect) dominates the dollar safety premium (USD effect). My findings highlight the foreign discount effect in interna- tional corporate bonds, particularly amidst escalating global economic instability and uncertainty.

This study empirically investigates the impact of dialect diversity on corporate investment efficiency under different levels of economic policy uncertainty. Our findings reveal that local dialect diversity enhances investment efficiency during stable periods, but this advantage significantly diminishes under high economic policy uncertainty. This reduction primarily arises from underinvestment and overly cautious decision-making by fragmented management during periods of turmoil. Further analysis reveals that this reduction is exacerbated by stronger internal governance, which emphasizes checks and balances, and mitigated by stronger external governance, which focuses on supervisory power. Our results remain robust when using alternative measures of main variables and employing topography as an instrumental variable.

Using subsidiary-level data of 3,863 Chinese nonfinancial listed firms, we find their capital expenditures increase with foreign sales, and the difference arises from the investments of the firms’ foreign subsidiaries. We show that the foreign sales-foreign investment association becomes more sensitive when the economic policy uncertainty (EPU) increases in the domestic market. However, foreign EPU does not play such a significant role. We provide one possible explanation that due to global diversification, MNEs can hedge foreign EPU using their international subsidiary network, resulting in the overall investments unchanged. However, given China’s tight regulatory capital controls, the MNEs may be less able to hedge the domestic EPU, so that they reallocate investments from the domestic markets to the foreign markets, consistent with the transaction cost assumption underlying the real options theory. Robust tests show that access to foreign capital, profitability and institutional factors have little explanatory power over the MNEs’ foreign investment.

This paper focuses on how Chinese and global economic policy uncertainties (CNEPU and GEPU) and geopolitical risks (CNGPR and GGPR) affect the growth of inbound tourism in China using ARDL and NARDL models as well as monthly series of Chinese inbound tourism revenue and arrivals. Firstly, we find significant effects of CNGPR and GGPR as well as GEPU on the growth of inbound tourism in Hainan Province and even in China nationwide, while the impact of CNEPU is limited. Among them, GEPU always has a significant long-term negative impact on inbound tourism growth (both inbound tourism revenue and inbound tourism arrivals). However, CNGPR has a significant short-term negative impact on inbound tourism growth in China nationwide but it has a significant long-term negative impact on inbound tourism growth in Hainan Province. Besides, estimation results of NARDL model further show the significant short-term effects of GEPU and GGPR on the growth of inbound tourism arrivals in Hainan Province and even in China nationwide, and such short-term effects are always significantly asymmetric. Among them, the negative components of GGPR can always more influence the growth of inbound tourism arrivals. However, the positive components of GEPU can more influence the growth inbound tourism arrivals in Hainan Province, but the negative components of GEPU can more influence the growth of inbound tourism arrivals in China nationwide.

Using the sample of Chinese A-share listed firms from 2020 to 2021, this study investigates the impact of EPU on corporate ESG performance. We find that EPU improves corporate ESG performance, and the results largely hold after a series of robustness tests. Furthermore, EPU has a significantly positive effect on each dimension of corporate ESG performance (environment, society and governance). In addition, we document that the positive effect of EPU on corporate ESG performance is more pronounced for state-owned firms, and firms with better internal governance, better external governance, and firms that are more financially-constrained. This study provides large-sample empirical evidence for the effect of EPU on corporate ESG performance, which provides implications for management to make use of corporate ESG performance in the face with uncertain economic policy environment.

This study investigates whether and how corporate social responsibility (CSR) affects stock liquidity. Utilizing panel data from 3,366 Chinese enterprises spanning 2010 to 2021, empirical findings suggest that CSR endeavors facilitate an uplift in stock liquidity. Specifically, a 1% increase in CSR score will improve stock liquidity by 0.128%. The research further reveals that media coverage and corporate operations are crucial channels for CSR to affect stock liquidity, with the former playing a more dominant role. Notably, the bolstering effect of CSR on stock liquidity is amplified during periods of increasing economic policy uncertainty. Heterogeneity analysis reveals that the influence of CSR on stock liquidity is particularly salient in state-owned enterprises. Additionally, different CSR subcategories (shareholder responsibility, employee responsibility, and social responsibility) vary in their effect on stock liquidity. Shareholder and employee responsibilities both enhance stock liquidity, with the impact of shareholder liability being particularly pronounced.

Using sample of Chinese listed firms from Q1 2017 to Q4 2022, this article examines the impact of economic policy uncertainty on share repurchases. We find that economic policy uncertainty significantly increases the probability and scale of open market share repurchases. Private enterprises, government-supported enterprises, innovative enterprises, and investment hotspot enterprises repurchased more shares during periods of high economic policy uncertainty. Additionally, the market value of repurchase programs issued during periods of high economic policy uncertainty is larger. We also discover that economic policy uncertainty substantially influences the characteristics, timing, and outcomes of the repurchase programs. Lastly, this article confirms that share repurchase behavior has a similar effect to voluntary disclosures and can alleviate the information asymmetry triggered by economic policy uncertainty. In summary, Chinese listed firms have resorted to more share repurchases during periods of high economic policy uncertainty to convey their actual value and boost investor confidence, aligning with the signaling motive. Open market share repurchases surface as an efficacious instrument to cope with the risk from economic policy uncertainty.