The purpose of this study is to investigate the moderating impact of corporate governance (CG) on the relationship between economic policy uncertainty (EPU) and the sustainable growth (SG) of Chinese firms.
The study collects data of 975 Chinese non-financial listed firms for the period from 2010 to 2017. The study measures SG using a comprehensive index based on nine financial indicators and applies industry and year fixed effects regression to investigate the direct and moderating impact of CG on the relationship between EPU and SG of Chinese firms.
The results of the study explain that EPU negatively affects SG, while concentrated ownership, board independence and board gender diversity (BGD) positively contribute to the SG of the Chinese firms. The results also explain that concentrated ownership and BGD reduce the negative impact of EPU on the SG of the Chinese firms.
The study considers only non-financial firms; therefore, the results of this study cannot be generalized for financial firms. Future research can be carried out while considering financial firms as a unit of analysis.
The investigation of the negative impact of policy uncertainty on SG is essential for the government and policymakers to devise policies to reduce uncertainty. The investigation of the moderating effect of CG enriches the literature on corporates’ response to policy uncertainty. It provides valuable insights for corporates regarding CG mechanisms to attain SG.
To the best of the authors’ knowledge, this is the first study that investigates the moderating impact of CG on the SG of Chinese firms using an index-based measurement of SG.
