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Industrial policy and corporate investment efficiency

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  • Zhou, Bole
  • Zhao, Shouguo

Abstract

Drawing on the quasi-experiment formed by the revitalization plan of ten industries in China, this study empirically examines the impact of selective industrial policy on corporate investment efficiency within a difference-in-differences framework. The results show that the revitalization plan has a significant and negative effect on corporate investment efficiency by boosting over-investment while having little influence on under-investment. Further, we explore two potential channels underlying these findings, and find that the mediating effects of capital allocation efficiency and managerial overconfidence are significant. This study, therefore, demonstrates that the revitalization plan cannot effectively improve corporate investment efficiency, and has important implications for the use of selective industrial policy inside and outside China.

Suggested Citation

  • Zhou, Bole & Zhao, Shouguo, 2022. "Industrial policy and corporate investment efficiency," Journal of Asian Economics, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:asieco:v:78:y:2022:i:c:s1049007821001354
    DOI: 10.1016/j.asieco.2021.101406
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    Cited by:

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    2. Liuyang Xue & Junan Dong & Shiyao Jiang, 2024. "Digital financial development and inefficient investment: a study based on the dual perspectives of resource and governance effects," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-10, December.
    3. Yang, Baochen & An, Haokai & Song, Xinyu, 2024. "Oil price uncertainty and corporate inefficient investment: Evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
    4. Patel, Pankaj C. & Ojha, Divesh & Naskar, Shankar, 2022. "The effect of firm efficiency on firm performance: Evidence from the Domestic Production Activities Deduction Act," International Journal of Production Economics, Elsevier, vol. 253(C).
    5. Jiahui Xu & Chee-Pung Ng & Toong Hai Sam & Asokan Vasudevan & Poh Kiong Tee & Alex Hou Hong Ng & Wong Chee Hoo, 2023. "Fiscal and Tax Policies, Access to External Financing and Green Innovation Efficiency: An Evaluation of Chinese Listed Firms," Sustainability, MDPI, vol. 15(15), pages 1-19, July.
    6. Wang, Xinyi & Zhu, Ling, 2023. "How does export VAT rebates policy affect corporate investment efficiency? Evidence from corporate tax stickiness," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    7. Bai, Hanyu & Irfan, Muhammad & Hao, Yu, 2022. "How does industrial transfer affect environmental quality? Evidence from China," Journal of Asian Economics, Elsevier, vol. 82(C).

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    More about this item

    Keywords

    Selective industrial policy; The revitalization plan; Corporate investment efficiency; Difference-in-differences method;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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