Economic policy uncertainty and business performance: The moderating role of service transformation

Using a sample of Chinese A-share-listed manufacturing companies from 2011 to 2020, the impact of economic policy uncertainty (EPU) on business performance was analyzed. The results show that EPU is detrimental to improving business performance; service transformation can significantly offset the adverse effects of EPU on business performance. This positive effect increases with the depth of service transformation. Furthermore, embedded service transformation is more effective than mixed-service transformation in weakening the adverse effects of EPU on business performance. Additionally, the study found that the moderate effect is more noticeable in non-state-owned enterprises and low-sale growth firms. The results are robust after the specifications of many variables, possible endogeneity issues, and more control variables are considered.

Automated summary

Using a sample of Chinese A-share-listed manufacturing companies from 2011 to 2020, this study analyzed the impact of economic policy uncertainty (EPU) on business performance. The findings indicate that EPU has a negative effect on improving business performance, but service transformation can effectively counteract this adverse impact, with the strength of the effect increasing with the depth of service transformation. Furthermore, embedded service transformation is more effective than mixed-service transformation in mitigating the adverse effects of EPU on business performance. The moderate effect is more pronounced in non-state-owned enterprises and low-sale growth firms. The robustness of the results is confirmed after controlling for various variables, addressing endogeneity issues, and including additional control variables.