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The guiding effect of economic stimulus plan on corporate investment behavior in heterogeneous institutional environment

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  • Yang, Yan
  • Wang, Yuqian
  • Qi, Chengzan

Abstract

This paper studies the impact of China’s “Four Trillion” Economic Stimulus Plan (hereinafter referred to as the Plan) on the investment behavior of enterprises under different external and internal institutional environments. By dividing the impacts of the Plan into direct and indirect ones, we found that the indirectly-affected enterprises expand investment in fixed assets in areas with a low degree of marketization, while the directly-affected enterprises increase investment in intangible assets in areas with a high degree of marketization. However, the guiding effect of the Plan on corporate investment only exists in enterprises with low financial flexibility. These results indicate that the Plan stimulates enterprises to expand investment in different directions by different impact mechanisms, and the degree of regional marketization and the financial flexibility of enterprises determine whether the enterprises select to expand their investment under the Plan.

Suggested Citation

  • Yang, Yan & Wang, Yuqian & Qi, Chengzan, 2023. "The guiding effect of economic stimulus plan on corporate investment behavior in heterogeneous institutional environment," Economics Letters, Elsevier, vol. 224(C).
    • Handle: RePEc:eee:ecolet:v:224:y:2023:i:c:s0165176523000289
    DOI: 10.1016/j.econlet.2023.111003
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    References listed on IDEAS

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    1. Özgür Arslan-Ayaydin & Chris Florackis & Aydin Ozkan, 2014. "Financial flexibility, corporate investment and performance: evidence from financial crises," Review of Quantitative Finance and Accounting, Springer, vol. 42(2), pages 211-250, February.
    2. Zhenghui Li & Zhehao Huang & Hao Dong, 2019. "The Influential Factors on Outward Foreign Direct Investment: Evidence from the “The Belt and Road”," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(14), pages 3211-3226, November.
    3. Ouyang, Min & Peng, Yulei, 2015. "The treatment-effect estimation: A case study of the 2008 economic stimulus package of China," Journal of Econometrics, Elsevier, vol. 188(2), pages 545-557.
    4. Burdekin, Richard C.K. & Weidenmier, Marc D., 2015. "Assessing the impact of the Chinese stimulus package at home and abroad: A damp squib?," China Economic Review, Elsevier, vol. 33(C), pages 137-162.
    5. Liu, Qigui & Pan, Xiaofei & Tian, Gary Gang, 2018. "To what extent did the economic stimulus package influence bank lending and corporate investment decisions? Evidence from China," Journal of Banking & Finance, Elsevier, vol. 86(C), pages 177-193.
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    Cited by:

    1. 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.
    2. Wang, Miao & Wang, Yiduo & Wen, Shouxun, 2024. "ESG performance and green innovation in new energy enterprises: Does institutional environment matter?," Research in International Business and Finance, Elsevier, vol. 71(C).
    3. Jinjie Li & Wenlong Lou, 2024. "Digital Government Construction and Provincial Green Innovation Efficiency: Empirical Analysis Based on Institutional Environment in China," Sustainability, MDPI, vol. 16(22), pages 1-34, November.

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    More about this item

    Keywords

    Economic stimulus plan; Investment behavior; Marketization; Financial flexibility;
    All these keywords.

    JEL classification:

    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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