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

Abstract

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.