Economic policy uncertainty and firm innovation: Evidence from a risk-taking perspective

This study investigates the impact of economic policy uncertainty (EPU) on firm innovation. Using data on China's A-share listed companies for 2001–2017, we find that EPU is in general negatively associated with firms' innovation output. Further, we observe that the negative association be...

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Bibliographic Details
Published inInternational review of economics & finance Vol. 77; pp. 78 - 96
Main Authors Lou, Zhukun, Chen, Siyu, Yin, Wenwei, Zhang, Chuan, Yu, Xiaoyu
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.01.2022
Subjects
Economic policy uncertainty
Firm innovation
Firm value
Risk preference
Risk-taking ability
Risk preference
Economic policy uncertainty
Firm value
Firm innovation
L20
O31
G38
Risk-taking ability
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Summary:This study investigates the impact of economic policy uncertainty (EPU) on firm innovation. Using data on China's A-share listed companies for 2001–2017, we find that EPU is in general negatively associated with firms' innovation output. Further, we observe that the negative association between EPU and innovation mainly exists in firms whose executives have a low risk preference and in firms with weak risk-taking ability. Additionally, we find that corporate innovation has a stronger positive effect on firm value when EPU is lower. Our research provides important evidence about the effect of EPU on firm innovation from a risk-taking perspective.
ISSN:1059-0560
1873-8036
DOI:10.1016/j.iref.2021.09.014