Conference Paper
The Impact of Uncertainty on Firm Financial Fragility: How Has It Evolved Over Time?
No.
ERF32AC_219
Publisher
ERF
Date
May, 2026
Topic
C5. Econometric Modeling
G3. Corporate Finance and Governance
D2. Production and Organizations
This study examines the impact of uncertainty on firm financial fragility, with a particular focus on the temporal dynamics of this relationship. Utilizing the World Uncertainty Index (WUI) to measure uncertainty and the Altman Z-score to assess financial fragility, this study employs panel data methodologies. The analysis incorporates firm-level financial data and macroeconomic indicators from 41 countries over the period 1990–2022. The findings reveal that uncertainty significantly increases firm fragility. Notably, this negative effect varies by national income level, with high-income and upper-middle-income countries experiencing more pronounced impacts. To explore these temporal dynamics, we employ a rolling window approach. This reveals a nuanced pattern: the negative impact of uncertainty diminished until approximately 2010 but has intensified in subsequent years. This trend underscores the growing importance of integrating uncertainty into corporate risk management strategies.