The influence of fiscal policy uncertainty on corporate total factor productivity: Evidence from Chinese public companies

Abstract

This paper uses China's public companies to test the influence of fiscal policy uncertainty on corporate total factor productivity. The study finds that fiscal policy uncertainty has a negative impact on the total factor productivity, and the effect of conservative tax avoidance, a mediating variable between the two, is found more significant for non-state-owned and non-recession-stage enterprises. The study further finds that facing fiscal policy uncertainty, companies reduce R&D investment, which will deteriorate productivity. The overall results show that if the government maintains relatively stable fiscal policies, it will positively improve corporate total factor productivity, even in a longer period.