The Impact of Economic Policy Uncertainty on Petrochemical Companies Profitability Ratio

Subject Areas : Financial Economics

Hamidreza Arbab ^{1 *} , Hamid Amadeh ² , Amin Amini ³

1 - Associate professor of economic faculty
2 - Associate professore of economic faculty
3 - دانشجوی دکترای اقتصاد بازار و مالیه نفت و گاز، دانشگاه علامه طباطبائی

Received: 2020-01-09 Accepted : 2024-07-02 Published : 2024-09-11

Keywords: Key Words: Economic policy uncertainty, profitability ratio, petrochemical companies. JEL Classification: G17, C15, C22,

Abstract :

Abstract

 

Uncertainty refers to volatile economic policies resulting from any changes in government economic policies. This study examines the factors creating economic instability that lead to fluctuations in the profitability ratios of petrochemical companies. The time series data for variables such as market dollar rates, public revenues, government expenditures, and liquidity have been used seasonally as policy variables during the years 2008-2018. Information on the profitability ratio of petrochemical companies, as the dependent variable, was extracted from the companies' profit and loss statements on a seasonal basis.

 

The ARIMA-GARCH model was used to create an index representing economic policy uncertainty. This estimated uncertainty index, along with other factors affecting profitability, including changes in the OPEC basket price, petrochemical product exports, and domestic petrochemical product consumption, was analyzed using quantile regression on the profitability ratios of companies.

 

The results indicated that current uncertainty would reduce the profit-to-sales ratio of the first four deciles by up to 5.7%, and residual uncertainty from four previous periods (the previous year) would reduce the ratio by up to 4.9%. The impact of current uncertainty is not uniform across all deciles; hence, companies in the first four deciles are adversely affected by uncertainty, whereas companies in higher deciles do not experience significant impacts from uncertainty. For these companies, changes in oil prices, consumption, and exports have a more substantial impact.