Does Uncertainty About Economic Policy Prompt Boards to Change?

Economic policy uncertainty (EPU) measures the ambiguity that government officials introduce into fiscal, regulatory, or monetary policy (Baker, Bloom, and Davis, 2016).[1] EPU is intended to be a comprehensive measure of uncertainty, capturing ambiguity about a firm’s operating environment rather than serving simply as an early indicator of a recession or a weak economy. EPU spikes around close presidential elections, wars, the September 11 attacks, the collapse of Lehman Brothers, and the COVID-19 pandemic.

In our forthcoming paper in The Financial Review, we consider how boards of directors alter their structures to handle exogenous changes in uncertainty. EPU … Read more