Fiscal Policy Uncertainty and Enterprise Investment

Abstract

Abstract: Stabilizing expectations and stabilizing investment are key priorities for advancing high-quality economic development. Local fiscal policy uncertainty, as a major external risk source faced by enterprises, has a significant impact on enterprises’ investment behavior. Based on the data from Chinese A-share listed companies, this study empirically analyzes the impact and mechanism of local fiscal policy uncertainty on corporate investment behavior. The findings show that an increase in local fiscal policy uncertainty will significantly reduce the investment scale of enterprises in the region, and when the uncertainty of local fiscal policy increases by 1%, the investment scale of enterprises in the region will decrease by 0.037%. The mechanism analysis reveals that when the uncertainty of local fiscal policies increases, enterprises will reduce investment due to the strengthening of risk aversion motivation. The uncertainty of local fiscal policies can lead to financial intermediaries such as banks being reluctant to lend, reducing the availability of corporate financing and ultimately decreasing the supply of investment funds. The heterogeneity analysis reveals that the investment behavior of non-state-owned enterprises is more sensitive to local fiscal policy uncertainty, and that in areas with high fiscal pressure, the reduction effect of fiscal policy uncertainty on enterprise investment scale is more pronounced. Therefore, it is necessary to further strengthen the countercyclical adjustment and expectation management of fiscal policies, and consolidate the foundation for stable investment by enterprises; to optimize the fiscal decentralization relationship and policy transparency between the central and local governments, and alleviate the imbalance of regional policy uncertainty; to focus on the policy adaptability of small and medium-sized private enterprises and build a targeted policy support system.

Key words: fiscal policy uncertainty, financial pressure, enterprise investment, enterprise risk aversion, enterprise financing availability

CLC Number:

F812.0

Zhang Zi-run, Cai Jia-yao, Chen Bin-kai, Yuan Jin. Fiscal Policy Uncertainty and Enterprise Investment[J]. Contemporary Finance & Economics, 2025, 0(12): 61-74.

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