Does property insurance promote corporate innovation? Evidence from China

This paper investigates the impact of property insurance on corporate innovation. Using data from Chinese listed firms between 2010 and 2021, we find that property insurance can reduce the uncertainty arising from negative cash flows and then promote corporate innovation. This finding holds true when controlling endogeneity and performing robustness checks. The mechanism tests suggest that the positive impact of property insurance use on corporate innovation is primarily attributed to the enhancement of companies' risk-taking and the alleviation of financing constraints. Additionally, the effects of property insurance use are stronger for non-state-owned companies, high- and new-technology enterprises, and firms led by more innovative managers. Overall, this study highlights the role of property insurance in enhancing corporate incentives for innovation.