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This study empirically investigates the impact of firms’ uncertainty perception on cross-regional investments and its mechanisms using data on Chinese A-share listed firms and their subsidiaries from 2010 to 2021 and firm-level economic policy uncertainty perception. The results indicate that a high uncertainty perception significantly inhibits cross-regional investments. Mechanism analysis shows that rising uncertainty heightens investment risks, intensifies firms’ financing constraints, hampers firms’ ability to engage in institutional arbitrage, and induces firms to postpone investments and adopt a wait-and-see strategy, thereby suppressing cross-regional investment. Heterogeneity analysis reveals that the suppressing effect of uncertainty perception on cross-regional investments is concentrated among non-state-owned, technology-intensive, and small firms. Further, we find that uncertainty perception significantly discourages domestic cross-regional investments, while significantly promoting cross-border investments. Moreover, higher uncertainty in the province in which the parent company is located significantly reduces intra-provincial cross-regional investments, while stimulating inter-provincial investments. This indicates that when local uncertainty intensifies, firms reduce local resource reallocation instead of pursuing inter-provincial or cross-border investments to hedge against regional risks and seek more stable external environments. This study provides policy implications for governments to facilitate cross-regional capital flows and foster regional economic growth.
Chen et al. (Sat,) studied this question.