Policy uncertainty firm respond, and performance : an empirical study of Chinese film industry

Abstract

Existing studies have demonstrated that policy uncertainty has an important impact on firm behaviors and performance. However, few articles have empirically explored the impact of policy uncertainty on corporate performance and how companies respond to policy uncertainty. I will address this gap by investigating the consequences of policy uncertainty and firm’ response strategies. This thesis includes three independent but complementary essays. In the first essay, drawing on an in-depth interview of five cases, I verify the notions that there are indeed uncertainties in the formulation of film industry policies, which are mainly manifested in three aspects; 1) many policies of the film industry do not have official documents, and only rely on oral expressions; 2) many film policies themselves are relatively vague, which makes the interpretation of film policies quite different; 3) there is a lack of coordination and even conflicts between various film policies. In addition, I also find that policy uncertainty does have a huge impact on corporate behavior and each company has different ways to deal with policy uncertainty. In the second essay, I investigate the influence of policy uncertainty on firm performance (indicated by box-office), and how film firm deal with this uncertainty. Through empirical research, I found that policy uncertainty negatively related to box office. Moreover, the negative relationship between policy uncertainty and box office is weaker when the content of firms are more complex. Furthermore, I also explore how firm respond to policy uncertainty, and find that firms will diversify their product to deal with policy uncertainty. In the third essay, I examine explores how companies respond to policy uncertainty. Through analysis, I found that when faced with policy uncertainty, companies are more likely to adopt avoidable response strategies. But when uncertainty is caused by the direction of policies, companies will also adopt manipulative strategies to make full use of the opportunities hidden in the policies. Overall, based on three studies, I contribute to the policy uncertainty, and firm respond literature by providing empirical evidences.