Impact of economic policy uncertainty on financial flexibility before and during the COVID-19 pandemic

Dalwai, T ORCID: https://orcid.org/0000-0001-5754-5384, 2023. Impact of economic policy uncertainty on financial flexibility before and during the COVID-19 pandemic. Journal of Asian Business and Economic Studies, 30 (4), pp. 283-295. ISSN 2515-964X

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Abstract

Purpose: This study examines the influence of economic policy uncertainty on financial flexibility before and during the coronavirus disease 2019 (COVID-19) pandemic. Few prior studies have examined this association specifically for debt and cash flexibility.

Design/methodology/approach: Using quarterly data from 2016 to 2022, 1014 observations were collected from the S&P Capital IQ database for listed tourism companies in India. The pre-pandemic period is defined as 2016 Q1 to 2020 Q1, whereas the pandemic period is from 2020 Q2 to 2022 Q3. The data are analysed using ordinary least squares, probit, logit and difference-in-difference (DID) estimation.

Findings: The evidence of this study suggests a negative association of economic policy uncertainty with debt flexibility during the COVID-19 pandemic. The findings also suggest that COVID-19 induced economic policy uncertainty results in high cash flexibility. This meets the expectations for the crisis period, as firms are likely to hold more cash and less debt capacity to manage their operations. The results are robust for various estimation techniques.

Research limitations/implications: This study is limited to one emerging country and is specific to one non-financial sector. Future research could extend to more emerging countries and include other non-financial sector companies.

Practical implications: The findings of this research are useful for tourism sector managers as they can effectively manage their cash and debt flexibility during crisis periods. They will need to prioritise cash flexibility over debt flexibility to manage operations effectively. Policymakers need to provide clear and stable economic policies to help firms manage their debt levels during a crisis.

Originality/value: To the best of the author's knowledge, no existing studies have investigated the influence of economic policy uncertainty on the financial flexibility of tourism companies before and during the COVID-19 pandemic. Furthermore, this study establishes a novel set of critical determinants, such as economic policy uncertainty.

Item Type:	Journal article
Publication Title:	Journal of Asian Business and Economic Studies
Creators:	Dalwai, T.
Publisher:	Emerald
Date:	29 November 2023
Volume:	30
Number:	4
ISSN:	2515-964X
Identifiers:	Number Type 10.1108/jabes-08-2022-0205 DOI 1879019 Other
Rights:	© 2023 Tamanna Dalwai. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
Divisions:	Schools > Nottingham Business School
Record created by:	Jonathan Gallacher
Date Added:	26 Mar 2024 11:29
Last Modified:	26 Mar 2024 11:29
URI:	https://irep.ntu.ac.uk/id/eprint/51160

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