Economic policy uncertainty exposure and corporate innovation investment: Evidence from China

By Xin Cui, Chunfeng Wang, Jing Liao, Zhenming Fang, Feiyang Cheng. Pacific-Basin Finance Journal, 2021

214 citations recorded by the source corpus.

Abstract This study investigates the impact of firms' heterogeneous exposure to economic policy uncertainty (EPU exposure) on corporate innovation investment. The results show that, first, a significant negative relationship exists between EPU exposure and corporate innovation investment, and this result continues to hold after controlling for endogeneity and conducting a series of robustness tests. Second, operational risk and financial distress are the main channels through which EPU exposure affects innovation investment. Third, firm-specific factors, such as government ownership, government subsidies, profitability, R&D personnel level, and sufficiency of net working capital, shape the relationship between EPU exposure and innovation investment. This study contributes new evidence on the impact of EPU exposure on firm behavior in China, where ongoing economic and financial reforms introduce sources of significant uncertainty.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/f6399950a81cd11424d8923f22c1d1f2e857f31a

How researchers see this paper

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In Accounting

1. Feiyang Cheng
2. Shouyu Yao
3. Yuying Pan
4. Gazi Salah Uddin
5. Ahmet Sensoy

In Economics and Econometrics

1. Gazi Salah Uddin
2. Ahmet Sensoy
3. Olivier Kraaijeveld
4. J. Smedt

Citations in the corpus

• Green credit policy and firm performance: What we learn from China (2021, background): “Following Cui et al. (2021), if the market value of a firm is higher than the median of sample firms, we categorize it as a large-cap firm, otherwise it is a small-cap firm.”