Policy Uncertainty and Firms' Strategic Change: 

The Interaction Effect of Political Turnover and Firms' Market and Non-market Resources

Time: November 14, 2019 (Thursday), 12:30-14:00

Location: Zhifuxuan Conference Room, National School of Development, Peking U.

Speaker: Yin Jun, National School of Development, Peking University.

Abstract:

To reconcile the theoretical tension between adaptive theory and structural inertia theory, this article studies the impact of policy uncertainty caused by the turnover of the party secretary or the mayor of cities on firms' strategic change. Using the annual data of Chinese A-share listed companies from 2008 to 2015, we find that political turnover will reduce the range of firms' strategic change, and this effect is weakened in firms with more political resources (state-owned firms and firms with politically connected managers) and market resources (firm assets) to cope with policy uncertainty. These results do not change when we use the counterfactual test, the alternative measure of policy uncertainty, the sample that excludes the general-election year of central government, and the propensity score matching method to do robust tests. Additional tests show that strategic change is more affected by the turnover of the party secretary than the turnover of the mayor. This article will enhance the understanding of the relationship between environmental uncertainty and firms' strategic change.