Policy Uncertainty And Financial Performance In The US Healthcare Industry

Authors: Omar Tarzibash, Manoj sangisetti, Fatima Al Sheikhly, Noor Gasgoos

Abstract: This study investigates the impact of economic policy uncertainty (EPU), healthcare policy uncertainty (HPU), and monetary policy uncertainty (MPU) on the financial performance of U.S. healthcare firms. Utilizing a balanced panel dataset of 120 publicly traded healthcare companies over 11 years (2013-2023), yielding 1,320 firm-year observations, the analysis employs pooled OLS, fixed effects, random effects, Hausman specification tests, and system GMM estimations. Financial performance is measured using return on assets (ROA), return on equity (ROE), and Tobin's Q, with firm-level controls including leverage, liquidity, size, R&D intensity, cash flow, tangibility, and net working capital. The empirical findings reveal that all three dimensions of policy uncertainty exert statistically significant negative effects on financial performance across model specifications. Among these, monetary policy uncertainty demonstrates the strongest and most consistent adverse impact, followed by healthcare and economic policy uncertainty. Firm characteristics such as liquidity, size, and cash flow generation mitigate the negative effects of uncertainty, while higher leverage and R&D intensity exacerbate financial vulnerability during uncertain periods. These results confirm that policy instability represents a critical strategic risk for healthcare firms, particularly those reliant on external financing and regulatory stability. The study contributes to the literature by demonstrating sector-specific effects of multiple uncertainty types and provides actionable implications for managers seeking to enhance financial resilience, investors evaluating policy risk exposure, and policymakers aiming to reduce regulatory ambiguity that hampers industry performance. Robustness checks using alternative performance measures and estimation techniques validate the core findings across accounting-based and market-based financial metrics.

DOI: http://doi.org/10.5281/zenodo.20507057