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Firm-level perception of uncertainty and innovation activity: Textual evidence from China's A-share market

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  • Yu, Zhen
  • Xiao, Yao
  • Li, Jinpo

Abstract

This study evaluates the firm-level perception of uncertainty using a textual analysis approach. Based on the annual reports of China's listed firms, we construct the perception of uncertainty from the management team and examine its impact on innovation activity. We find that managers' interpretations of the environment will affect their innovation incentives, and uncertainty leads to a decrease in the number of patent filings. The results are robust when we adopt an instrumental variable approach and apply alternative measures of variables. This study quantifies firms' perception of uncertainty and provides micro evidence for the correlation between uncertainty and innovation activity.

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  • Yu, Zhen & Xiao, Yao & Li, Jinpo, 2021. "Firm-level perception of uncertainty and innovation activity: Textual evidence from China's A-share market," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:pacfin:v:68:y:2021:i:c:s0927538x21000627
    DOI: 10.1016/j.pacfin.2021.101555
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    Cited by:

    1. Xia, Xiaoxue & Xiao, Yao, 2023. "Firm-level perception of competition and innovation: Textual evidence from China," Finance Research Letters, Elsevier, vol. 53(C).
    2. Yu, Zhen & Shen, Yiran & Jiang, Shengjun, 2022. "The effects of corporate governance uncertainty on state-owned enterprises' green innovation in China: Perspective from the participation of non-state-owned shareholders," Energy Economics, Elsevier, vol. 115(C).
    3. Wang, Bin & Wang, Liang & Gong, Bairong & Yan, Zhengwei & Hu, Pan, 2023. "Does broadband internet infrastructure mitigate firm-level economic policy uncertainty? Evidence from the Broadband China Pilot Policy," Economics Letters, Elsevier, vol. 232(C).
    4. Chada, Swechha, 2023. "Economic policy uncertainties and institutional ownership in India," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    5. He, Chao & Li, Yanxi & Zhu, Jiawei, 2022. "The effect of firm-level perception of uncertainty on innovation: Evidence from China’s listed firms," Economics Letters, Elsevier, vol. 221(C).

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