Economic policy uncertainty and enterprise innovation in China: From the perspective of equity financing and financing structure

Based on the perspective of equity financing and financing structure, this paper discusses the impact of economic policy uncertainty on enterprise innovation and analyzes the transmission mechanism of equity financing between them and the role of financing structure optimization under uncertainty. The findings reveal that economic policy uncertainty promotes enterprise innovation, and the positive effect is even more pronounced in non-state-owned and eastern enterprises, as well as high-tech enterprises. For the transmission mechanism of equity financing, it finds that the scale of equity financing and the cost of equity financing play positive and negative intermediary roles respectively. That is economic policy uncertainty promotes enterprise innovation by increasing the scale of equity financing and affects enterprise innovation negatively by increasing the cost of equity financing. For the overall financing structure of enterprises, the proportion of equity capital exerts positive mediating and moderating effects on the relationship of economic policy uncertainty and enterprise innovation. That is economic policy uncertainty promotes enterprise innovation by adjusting the financing structure, and the proportion of equity capital will also strengthen the incentive effect of policy uncertainty on innovation. Further, economic policy uncertainty will increase the equity financing scale, equity financing cost and equity capital proportion more obviously in non-state-owned enterprises, and the proportion of equity capital will strengthen the incentive effect of economic policy uncertainty on innovation more in non-state-owned enterprises. The conclusions of this paper not only provide decisionmaking reference on how to optimize the financing structure to better cope with economic policy uncertainty and then promote enterprise innovation for enterprises, but also provide theoretical support for optimizing macro-control, deepening financial system reform and enhancing enterprise competitiveness.