Economic Policy Uncertainty and Corporate Investment Dynamics: Do Ownership and Capital Structures Matter in Listed Chinese Firms?

Mingqing Yuan

Pacific Economic Review, 2026, vol. 31, issue 2, 183-221

Abstract: This study examines how economic policy uncertainty (EPU) affects corporate investment in China using a two‐step system generalized method of moments estimation from 4502 listed firms (2007–2023). Results reveal a non‐linear, inverted U‐shaped relationship: moderate EPU stimulates total and short‐term investments, while excessive EPU suppresses them. EPU amplifies the contractionary effects on long‐term and intangible asset investments under high uncertainty. Ownership and capital structures exert key moderating roles: Concentrated ownership enhances investment stability, whereas institutional and state ownership amplify contractions. Debt financing weakens investment responsiveness through leverage amplification, whereas equity financing provides a capital buffer that sustains investment under moderate EPU. The 2008 Global Financial Crisis intensified the adverse effects of high EPU on investment, whereas COVID‐19 stimulus policies mitigated the contractionary effects. Large firms exhibit lower sensitivity to EPU, while small firms display an inverted U‐shaped response, reflecting stronger financing constraints. These findings provide novel insights for corporate decision‐making and policy design in uncertain environments.

Date: 2026
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