Economic Growth Expectations and Corporate Innovation: Evidence From China

ABSTRACT We take the economic growth target established in the Chinese government's work report as a proxy variable for economic growth expectations to study the impact of economic growth expectations on corporate innovation and its underlying mechanisms using data from Chinese A‐share listed companies for the period 2011–2021. The results show that economic growth expectations are considerably positively related to corporate innovation. This facilitating effect is more significant in the samples characterized by hard constraints on economic growth expectations, non‐state‐owned firms, and the eastern region. A mechanism analysis shows that increased economic growth expectations reduce environmental uncertainty and ease financing constraints, thus promoting corporate innovation. Our study provides an important policy reference for improving firms' ability to innovate by managing economic growth expectations.