Analyzing the effect of economic policy uncertainty in healthcare: the role of working capital management and environmental performance index

Abstract

In periods of heightened EPU, healthcare institutions may face obstacles in monetary policy and strategic decision-making. Uncertainty in government policies and regulations leads to fluctuations in revenue streams and healthcare expenditures. This, in turn, may have an impact on the financial performance of healthcare institutions. This study, therefore, examines the impact of economic policy uncertainty (EPU) on financial performance (FP), considering the moderating roles of working capital management (WCM) and the environmental performance index (EPI) within the context of healthcare institutions. Using the financial data of the top 10 countries with the highest healthcare expenditures based on the availability of the EPU index between 2010 and 2022, the findings indicate that the EPU has a negative influence on FP. Decision-makers should therefore make the necessary arrangements to avoid the negative effects of uncertainties in healthcare institutions. The results show that WCM positively moderates the negative impact of EPU on FP. This means that the effective use of WCM policy may help healthcare institutions protect their financial position during periods of uncertainty. The results also reveal that EPI positively moderates the negative impact of EPU on FP. Firms with well-established environmental regulations exhibiting environmental consciousness can decrease the cost of waste pollution, disposable medical items, and energy consumption, which will in turn improve their FP. Overall, these findings contribute valuable insights for healthcare executives, policymakers, and investors into the roles that both WCM and EPI play in shaping the relationship between EPU and FP.