Firm-level perception of uncertainty, risk aversion, and corporate real estate investment: Evidence from China's listed firms

Real estate, characterized as a safe asset, is a distinct component of corporate financialization. Based on the management discussion and analysis texts of Chinese listed manufacturing companies from 2007 to 2019, our study utilizes textual analysis methods to quantify firm-level perception of economic policy uncertainty and explores the impact and mechanisms of firm-level perception of uncertainty on corporate real estate investment. The findings indicate that an increase in perceived uncertainty significantly enhances corporate real estate investment. These results are robust to a series of tests, including the application of instrumental variables and alternative variable specifications. Heterogeneity analysis reveals that nonstate-owned enterprises and firms in highly marketized regions are more likely to increase their real estate investment in response to economic uncertainty. Additionally, the mechanism analysis identifies risk aversion as the channel through which firm-level perception of uncertainty influences corporate real estate investment. This research not only quantifies firm-level perception of uncertainty but also provides empirical evidence of the link between uncertainty and corporate real estate investment behaviors.