Regulatory Uncertainty and Corporate Finance: An Organizational Process Perspective

• ZHANG YUWEI

  Author

With increasing regulatory volatility and institutional complexity, regulatory uncertainty has become a critical external factor shaping corporate financial decision-making. Existing studies largely adopt a “black box” view of the firm, focusing on financial outcomes while paying limited attention to the role of internal organizational processes. This study contributes to the corporate finance literature by examining how regulatory uncertainty affects corporate financial behavior through firms’ organized decision-making processes. Drawing on uncertainty theory and organizational theory, the paper develops an analytical framework linking regulatory uncertainty, structured financial decision-making, and corporate financial behavior. The analysis suggests that rising regulatory uncertainty heightens compliance cost expectations and risk perceptions, prompting firms to adopt more conservative financial strategies, such as reducing financial leverage and increasing cash holdings. More importantly, the study finds that organized financial decision-making plays a significant buffering role in this relationship. Through institutionalized, collective, and structured decision-making arrangements, firms enhance information integration, diversify individual decision-making risks, and strengthen institutional legitimacy, thereby mitigating excessive managerial risk aversion induced by policy volatility. Overall, this paper demonstrates that corporate financial responses to regulatory uncertainty are deeply embedded in organizational processes, offering a novel organizational perspective on heterogeneous financial behavior under complex regulatory environments.

• JAESD000009.pdf