Global Firms and the Dimensions of Economic Policy Uncertainty

We build a novel time-varying, firm-level measure of economic policy uncertainty (FEPU) for more than 550 companies from 48 countries. FEPU has a sizeable time-varying idiosyncratic dimension that is not captured in traditional country-level measures and that is highly and separately related to firms’ investment and financing decisions. Controlling for country-level uncertainty, firms reporting a higher FEPU than their country-peers reduce relatively more their capital expenditure, employment and debt issuance. Our results also show that firms headquartered in riskier countries exhibit a lower correlation between FEPU and country-level measures of policy uncertainty and a more muted response of their investment decisions to increases in FEPU, suggesting that they may be better adapted to deal with uncertainty