Economic policy uncertainty nexus with corporate risk-taking: The role of state ownership and corruption expenditure

This study investigates the role of state ownership and corruption expenditure in the relationship between economic policy uncertainty (EPU) and corporate risk-taking. The finding shows that EPU is significantly positively correlated with corporate risk-taking in China. The state ownership affects the link between EPU and corporate risk-taking, and SOEs are more willing to avoid risks in response to the increases of EPU. Corruption expenditure positively affects the relationship between EPU and corporate risk-taking. Compared with SOEs, non-SOEs have more incentive to respond to an increase of EPU through corruption expenditure. Moreover, China's anti-corruption campaign strongly affects the above effects. Our results are robust to alternative variable measures and endogeneity tests.

Automated summary

This study examines the relationship between economic policy uncertainty (EPU), corporate risk-taking, state ownership, and corruption expenditure in China. The results show a significant positive correlation between EPU and corporate risk-taking, with state-owned enterprises (SOEs) being more risk-averse in response to EPU, while non-SOEs are more likely to use corruption expenditure. The effectiveness of China's anti-corruption campaign also influences these effects.