Topic: The Bright Side of Political Uncertainty: The Case of R&D

Keynote Speaker: Leng Tiecheng, assistant professor in Finance Department, Lingnan (University) College, Sun Yat-sen University and PhD in Finance of Singapore Management University. His main research areas cover corporate finance, enterprise invention, political finance, supply chain finance, etc. His research outcomes were published on Management Science. And he took part in 2014 NBER Entrepreneurship Research Boot Camp.

Time & Date: 2:00-3:30 p.m., Sep. 29th 2015

Address: Room 603, Academic Hall.

Moderator: Jiang Fuwei, Lecturer of School of Finance, Central University of Finance and Economics.

Abstract：We examine the relationship between political uncertainty and R&D investment by exploiting the timing of U.S. gubernatorial elections as a source of plausibly exogenous variation in uncertainty. In contrast to the literature documenting negative effects of political uncertainty on real investment, we find that uncertainty over government policy encourages firm-level R&D. Firms increase R&D investments by an average of 4.6% in election years relative to non-election years. The uncertainty effect is stronger in hotly contested elections, in politically sensitive and hard-to-innovate industries, and in firms subject to higher growth options and greater product market competition. Our findings suggest that, as predicted by models of investment under uncertainty, the real effects of political uncertainty depend on the properties of the investment and the degree of product market competition and therefore the total effect of political uncertainty on the long-run growth of an economy is unclear.