**1. Introduction**

In recent years, a series of major global events, including the Sino-US trade friction, the outbreak of the COVID-19 pandemic, the Russia-Ukraine conflict, etc., have significantly elevated economic uncertainty, and the growth of many major economies worldwide has been hit hard. Economic development has been restricted by multiple factors, encountering various challenges and subdued growth. The uncertainty in global economic prospects has increased. China is in the midst of an increasingly grave and complicated international landscape, involving the frequent and sporadic pandemic outbreak, the ongoing "new normal" of pandemic control measures, and the boosted downward pressure on the economy. Owing to the global trend of economic integration, the sustainability and stability of China's growth is restricted by multiple factors, and the uncertainty of domestic economic policies is still high. Against this background, it is important to measure uncertainty of economic policy and study its impact.

Differently from other countries in the world, China uses the term "socialist market economy with Chinese characteristics" to describe its theory of economic policy. Since 1949, the central government in China has played a dominant role in economic life in the country. Furthermore, since 1978, China has enacted reform and started to use market economy tools to power up its economic development. Overall, while welcoming the free market economy, China still regarded the planned economy as the main component of China's national economy.

China's economic theory is relatively similar to the Keynesian economic theory. It advocates that the state adopts expansionary economic policies to promote economic growth by increasing demand; that is, to expand government spending, implement fiscal deficits, stimulate the economy, and maintain prosperity. From this perspective, considering the dependence of the economy on the government, uncertainty in the economic policy of China can exert a significant impact on the economy.

Economic uncertainty is a state in which economic entities cannot have accurate expectations on such issues as "whether to adjust policies", "how to adjust policies", and "the outcome and effect of policy execution". Under rising uncertainty, the government

**Citation:** Huang, H.; Liu, C.; He, Y. The Impact of Economic Policy Uncertainty on Executives' Self-Interest Behaviors: Evidence from China. *Sustainability* **2023**, *15*, 1815. https://doi.org/10.3390/su15031815

Academic Editors: Akrum Helfaya and Ahmed Aboud

Received: 17 December 2022 Revised: 13 January 2023 Accepted: 16 January 2023 Published: 18 January 2023

**Copyright:** © 2023 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/).

will introduce corresponding macroeconomic policies to stabilize the market and avert growth dilemma. Meanwhile, the adoption of new macro-control measures brings about new uncertainty. The uncertainty of economic policy will be transmitted to or directly affect enterprises, exerting impact on their behaviors. The changes in economic policies will significantly impact enterprises. For enterprise executives, in order to cope with the possible impact of economic policy uncertainty on enterprises and themselves, they will adjust strategic direction and behaviors in a timely manner in response to the external environment, so as to achieve stable development. In this process, facing the adverse effect of uncertainty, due to agency problems, executives may sacrifice the interests of shareholders and enterprises to protect their own interests.

The manner by which to alleviate the principal-agent conflict between managers and shareholders has always been the focus of corporate governance, and its causes and preventive measures have always been highlighted by the academic community. The self-interest behavior of executives is a typical embodiment of the principal-agent problem. According to principal-agent theory, executives adopt self-interest behaviors by sacrificing the interests of shareholders and enterprises to obtain personal benefits. As the utility functions of management and shareholders are different, and the separation of ownership and control leads to information asymmetry and incentive problems, management often seeks benefits for itself through various channels in order to maximize its own interests, which may damage the interests of shareholders and the company, negatively affecting enterprise performance. In the long run, the development of capital market becomes constrained and the healthy development of economy and society endangered [1].

Exploring the causes of executives' self-interest behavior is helpful to raise people's awareness to executives' irrationality and lay the foundation for taking corresponding countermeasures to executives' self-interest behavior. The existing literature studies the causes of such self-interest behaviors, most of which take the perspectives of corporate governance structure [2], government intervention [3], etc. The uncertainty of external economic policies, a factor often overlooked, also affects the behavior of executives. Existing research has found that the occurrence of executives' self-interest behavior is closely related to the external environment. The cognition and behavioral choices of executives are often influenced by the macro environment. The impact of rising uncertainty of external economic policy on executives' self-interest behavior is still unknown. Based on the theory of myopic behavior, for the sake of maximizing personal interests, higher risks will induce executives to pursue short-term interests, which can be quickly materialized, at the price of longterm ones. Based on prospect theory, with the risk of external uncertainty, executives are subject to higher dismission risk and tougher employment conditions. As a result, their decisions and behaviors will be more conservative, thus inhibiting self-interest behaviors. In conclusion, from the theoretical point of view, the jury is still out on whether executives' self-interest behavior is influenced by the uncertainty of external economic policy.

Based on the existing research, this paper studies the influence of economic policy uncertainty on executives' self-interest behavior, and introduces the moderating effect of internal control, so as to examine the changes of such influence under different levels of corporate internal control. Selecting A-share listed companies in China from 2010 to 2021 as research samples, this paper empirically discovers that the uncertainty of economic policy will inhibit the explicit self-interest behavior of executives, namely excessive executive compensation. However, the uncertainty of economic policy encourages, rather than restrains, the implicit self-interest behavior of executives, namely excessive on-the-job consumption. Further research illustrates that, under the uncertainty of economic policy, effective internal control is conducive to restraining executives' implicit self-interest behavior, as well as its explicit counterpart. Finally, we found that the above effect is more significant in SOEs. In addition, strong market competition and stable institutional investors are conducive to restraining executives' implicit self-interest.
