Political Uncertainty and Corporate Risk-taking: Evidence from the Listed Companies in China
DOI:
https://doi.org/10.22452/JIE.vol18no3.9Keywords:
Political uncertainty, Political ties, Risk-taking, Government officials, ChinaAbstract
This study draws from resource dependence theory to investigate the impact
of political uncertainty on corporate risk-taking in China. The sample of this study is
the 1,740 non-financial listed companies from the period of 2012-2024, and the panel
data analysis approach is used for hypothesis testing. By using the hand-collected official
turnover data at municipal-level city governments, the results show that: (1) political
uncertainty has a significantly negative effect on corporate risk-taking, that is, when
firms are present in the context of political uncertainty, their risk-taking tend to become
lower; (2) political ties reduces this negative effect, that is, both state ownership ties and
managerial political ties are positively moderate the negative effect of political uncertainty
on corporate risk-taking. The findings of the study deepen our understanding of the
economic consequences of political uncertainty on corporate risk-related decision-making
and offer valuable perspectives for corporate risk management strategies.
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