Corporate performance volatility: a micro-level perspective

Abstract

Purpose – This study examines how specific micro-level macroeconomic indicators influence corporate performance volatility among US corporate bodies in the short run. Design/methodology/approach – The study employs error correction autoregressive distributed lagged (ARDL) model (ECM) to examine how micro-level variables influence volatility associated with corporate performance in the short run. Findings – This paper finds that disaggregated or micro-level variables examined, tend to exhibit features that are not readily apparent from the aggregate variable from which such variables are derived. For instance, reported empirical estimate suggests that, growth in expenditures on services and nondurable goods tend to lower volatility associated with corporate performance, whereas government expenditures and expenditures on durable goods rather worsens volatility associated with corporate performance, all things being equal. Additionally, presented empirical estimates further provide evidence suggesting that macroeconomic uncertainty and inflation uncertainty significantly moderate or influence the extent to which disaggregated variables impact corporate performance volatility. Originality/value – Compared to related studies in the reviewed literature, this study rather examines volatility associated with corporate performance instead of the corporate performance indicator itself. Additionally, this paper also examines how disaggregated variable instead of aggregate variables impact such volatility. Finally, the moderating role of key macroeconomic conditions in such a relationship is also examined.

Keywords

• Corporate performance volatility
• Disaggregated macroeconomic variables
• Inflationary uncertainty
• Macroeconomic uncertainty and ARDL model