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Industrial policy, enterprise investment risk taking and innovative activities

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  • Zhou, Bing
  • Qin, Mengyuan
  • Zhan, Feng

Abstract

The policy environment is an important external environment which determines the survival and development of enterprises. Our study examines the impact of industrial policy on corporate investment risk and its mechanisms based on an analysis of Chinese public-listed firms from 2011 to 2021. We find that industrial policy significantly reduces investment risk by bolstering managers' optimistic expectations. Moreover, we find that industrial policy has a greater impact on mitigating enterprise investment risk when the innovation level of enterprises is higher. Industrial policy also has a stronger impact for non-SOE firms and for firms located in regions with lower economic development. Our research offers theoretical insights that bridge the gap between macro-level industrial policy and micro-enterprise investment behavior, and practical guidance to help governments plan industrial policy rationally and help enterprises gain a better understanding of investment risks appropriately.

Suggested Citation

  • Zhou, Bing & Qin, Mengyuan & Zhan, Feng, 2025. "Industrial policy, enterprise investment risk taking and innovative activities," Finance Research Letters, Elsevier, vol. 86(PC).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pc:s1544612325017805
    DOI: 10.1016/j.frl.2025.108526
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    Keywords

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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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