Speculative culture and corporate high-quality development in China: mediating effect of corporate innovation

China has shifted from a high-growth model to a high-quality, sustainability-oriented development paradigm. At the micro level, firms are central to achieving this goal. While prior research mainly examines corporate characteristics and formal institutions as antecedents of firms’ high-quality development, there is limited exploration of negative and informal institutional factors. Given the strong influence of culture in China, the study investigates whether and how speculative culture—emphasizing short-term gains and risk-taking—affects firms’ high-quality development, proxied by total factor productivity (TFP). The authors posit competing hypotheses: speculative culture may impede high-quality development by fostering short-termism (H1a), or it may promote adaptability and efficiency (H1b). The paper aims to test the net effect and the mechanism, focusing on corporate innovation as a mediator.

Research on corporate high-quality development in China highlights the transition from speed to efficiency and sustainability, emphasizing the roles of government supervision, CSR, environmental disclosure, digital finance, strategic alliances, and ESG in promoting firms’ high-quality development and innovation. However, informal institutions are understudied. Confucian culture traditionally encourages long-termism and integrity, whereas speculative culture prioritizes short-term gains and higher risk. Prior studies link speculative culture to governance and performance outcomes: increased financial asset investment via risk preferences; higher likelihood of corporate misconduct; riskier practices (e.g., tax avoidance); greater stock price crash risk; wider bond yield spreads; and excessive investment lowering efficiency. These mixed effects motivate examining speculative culture’s impact on high-quality development. The authors propose two alternative hypotheses: H1a, speculative culture impedes high-quality development; and H1b, speculative culture promotes it by enhancing responsiveness and operational optimization.

Data: The sample comprises Chinese A-share listed firms from 2010–2019. Firm-level financials/characteristics are from CSMAR; regional GDP, population, and lottery sales from the National Bureau of Statistics. ST, PT, financial, and real estate firms are excluded. Variables are winsorized at 1%, yielding 10,140 firm-year observations. Measures: Speculative culture (independent variable) is proxied by per capita lottery sales (hundreds of yuan) at the provincial level. Alternative proxies include the number of mahjong parlors per capita and the number of mahjong parlors (web-scraped from Baidu Maps and scaled by provincial population aged 15+). Corporate high-quality development (dependent variable) is proxied by firm TFP estimated using the Levinsohn–Petrin (LP) semi-parametric method; Olley–Pakes (OP) estimates are used for robustness. Controls include firm size (log assets), ROA, book-to-market, analyst coverage, annual stock return, turnover, ownership concentration (largest shareholder), separation of ownership and control, SOE dummy, as well as regional GDP per capita, GDP growth, and population growth; industry and year fixed effects are included. Research design: The baseline is a linear panel regression of TFP on lagged speculative culture and lagged controls, with cluster-robust standard errors at firm and year levels. Robustness checks employ OP-based TFP, alternative speculative culture proxies (mahjong prevalence), and an instrumental variable (IV) approach using local natural disaster economic losses per capita to address endogeneity (disasters as exogenous shocks affecting risk-taking propensity). Mechanism analysis: A mediation model tests whether speculative culture suppresses innovation (measured by granted patents), which in turn affects TFP. Heterogeneity: Interaction terms examine whether firm size (above/below median) and analyst coverage (above/below median) moderate the effect of speculative culture.

Descriptive statistics indicate substantial cross-regional variation in speculative culture (mean 1.640; SD 0.590; min 0.323; max 7.679) and in firms’ TFP (mean 8.284; SD 1.013). Baseline regressions show speculative culture is significantly negatively associated with TFP: coefficient on Speculative is -0.042 (t = -3.547, p < 0.01) for TFP_LP, and -0.026 (t = -2.353, p < 0.05) for TFP_OP. Alternative proxies corroborate the findings: mahjong parlors per capita (M_P) coefficient -14.977 (t = -2.079, p < 0.05); mahjong parlors count (M_N) coefficient -16.757 (t = -1.924, p < 0.10). IV results using natural disasters affirm causality: first stage indicates disasters strongly predict the speculative culture index (e.g., high t-statistics); second stage shows the instrumented speculative culture reduces TFP (coefficient ≈ -0.081, t ≈ -1.625, p < 0.10). Mechanism: Speculative culture reduces innovation output—Speculative → Patents: -43.155 (t = -2.581, p < 0.01). Patents positively relate to TFP (coefficient ≈ 0.000, t = 1.970, p < 0.05), and the direct effect of Speculative on TFP becomes insignificant when Patents enter, supporting partial mediation via innovation suppression. Heterogeneity: The negative effect of speculative culture is weaker for larger firms and for firms with higher analyst coverage; interaction terms with size (Spe_Sca) and with analyst attention (Spe_Att) are significantly positive, indicating monitoring and internal capacity mitigate the adverse impact. Case illustrations (Ganfeng Lithium in Jiangxi; Tiamaes in Henan) from low-speculative regions exhibit stronger innovation and higher-quality development trajectories.

The findings support H1a: local speculative culture, emphasizing short-term gains, undermines firms’ high-quality development by constraining innovation investment and output, thereby lowering TFP. The causal identification via natural disasters strengthens the interpretation that idiosyncratic regional cultural risk-taking propensities translate into firm-level short-termism. The mitigating roles of firm size and analyst coverage suggest that internal governance capacity and external monitoring can buffer cultural pressures. Regionally uneven speculative atmospheres help explain disparities in firm productivity and development quality, highlighting the importance of informal institutions alongside formal policies. Policy implications include fostering innovation-friendly environments and enhancing market oversight to counteract speculative excesses.

The study demonstrates that stronger local speculative culture hampers corporate high-quality development in China, primarily through reduced corporate innovation. Robustness checks with alternative measures and an IV approach confirm the negative and causal relationship. The adverse effect is attenuated in larger firms and where analyst attention is higher. Practical recommendations include committing to long-term strategic goals, prioritizing and resourcing innovation projects, strengthening managerial oversight of innovation, and cultivating collaborative, knowledge-sharing cultures to counter short-termist tendencies. The research advances understanding of informal institutional influences on firms and offers guidance for policies promoting high-quality economic development.

Speculative culture is measured at the provincial level via per capita lottery sales, which may be coarse; future work could adopt finer-grained cultural indicators. The study focuses on China, where political institutions and policy emphasis on sustainability may shape the observed effects; generalizability may differ under other institutional regimes. Speculative culture may exert nonlinear or context-dependent effects across political systems. Future research could refine measurement, explore cross-country comparisons under different institutions, assess policy interventions (e.g., financial regulation, legal frameworks) to mitigate adverse effects, and examine nuanced mechanisms across management, innovation, and sustainability domains.