The effect of firm-level uncertainty on R&D investment and corporate risk-taking of firms in BRICS countries: a simultaneous approach

Abstract

ABSTRACT This study examines the effect of firm-level uncertainty on R&D investment and corporate risk-taking. The current study uses unbalanced panel data of nonfinancial listed firms in BRICS countries (i.e. Brazil, Russia, India, China, and South Africa) for the period 2009–2020, totalling 24,564 observations. We applied a robust two-step generalized method of moments (GMM) to estimate the model and control for endogeneity issues. The findings show that firm-level uncertainty significantly influences R&D investment and corporate risk-taking in BRICS countries. The panel vector autoregression (PVAR) provides more robust results and confirms the significant impact of firm-level uncertainty on R&D investment and corporate risk-taking. The result indicates that firm-level uncertainty has a significant negative effect on R&D investment but a significant positive impact on corporate risk-taking. This study offers important implications for managers, policymakers, and investors in emerging markets where the relationship has remained ambiguous and applies both theories to analytically investigate the impact of uncertainty on R&D investment and corporate risk-taking of firms in BRICS countries.