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Policy uncertainty and corporate innovation in a transitional economy: evidence from China

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  • Xiaoyan Lu
  • Manni Zheng

Abstract

This paper systematically studies whether external shocks of mayor turnover in prefecture level cities in China, proxied for policy uncertainty, result in a reduction of firms’ R&D spending. We find that policy uncertainty is negatively correlated with firms’ R&D spending under mayor turnover. This finding only exists in state-owned enterprises (SOEs) that are inherently and closely connected with regional governments. The negative effect between R&D spending and policy uncertainty is more profound for SOEs operating in an uncertain macroeconomic environment, facing high risk and having financial constraints.

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  • Xiaoyan Lu & Manni Zheng, 2023. "Policy uncertainty and corporate innovation in a transitional economy: evidence from China," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 30(4), pages 849-867, July.
    • Handle: RePEc:taf:raaexx:v:30:y:2023:i:4:p:849-867
    DOI: 10.1080/16081625.2021.1987937
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    Cited by:

    1. Zhang, Yue & Song, Tonghu & Fang, Zhengshuai & Zhang, Chaomin & Chen, Xi, 2023. "“Conniving” or “controlling”: How does banking competition impact private enterprise violations?," Finance Research Letters, Elsevier, vol. 58(PC).

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