Economic policy uncertainty and firm’s profitability: the role of logistics infrastructure

Abstract

PurposeThis study investigates the effect of economic policy uncertainty on the firm profitability through moderating role of logistics infrastructure index using US non-financial firms listed at NASDAQ.Design/methodology/approachWe used secondary data set which includes firm-level indicators of 2,323 non-financial US firms listed at NASDAQ over the period of 1998–2018. Ordinary least squares regression with multiple fixed effects used to analyze the data and estimate hypotheses.FindingsThe results show that economic policy uncertainty negatively impacts the firm’s profitability whereas the logistics infrastructure positively moderates the negative impact of EPU on the firm’s profitability.Research limitations/implicationsEconomic policy uncertainty is a significant challenge for managerial decision making and a direct threat to a firm’s profitability. The results of this study imply that the state of logistics infrastructure must be considered as an important policy tool by the senior management to mitigate the negative impact of economic policy uncertainty and to safeguard a firm’s profitability.Originality/valueThis study highlights that logistic infrastructure plays an important role in alleviating the adverse effect of economic policy uncertainty on the profitability of a US non-financial firm.