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Government procurement and corporate investment efficiency: Evidence from China

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  • Yang, Liu
  • Li, Ran

Abstract

This study investigates the impact of government procurement on the microeconomic landscape, particularly focusing on investment decisions and efficiency within corporations. Utilizing a dataset spanning 2015 to 2021 from A-share listed companies in China, the study examines how government contracts, as reported by the China Government Procurement website, influence corporate investment strategies. The analysis reveals that government procurement significantly enhances investment efficiency and mitigates common corporate investment deficiencies. These findings are robust, confirmed through instrumental variable techniques and validation procedures. Furthermore, the study explores the underlying mechanisms, suggesting that government procurement facilitates corporate financial fluidity and reduces environmental unpredictability. The impact is notably more pronounced in private sector entities, high-tech industries, and economically advanced regions in eastern China. This research provides empirical evidence of government procurement's efficacy as an economic instrument, highlighting its role in promoting corporate fiscal prudence. However, the study acknowledges limitations, such as potential variability in procurement practices across different regions and industries, which may affect the generalizability of the findings. Future research could explore the long-term effects of government procurement on corporate innovation and broader economic outcomes.

Suggested Citation

  • Yang, Liu & Li, Ran, 2024. "Government procurement and corporate investment efficiency: Evidence from China," Finance Research Letters, Elsevier, vol. 67(PB).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324009644
    DOI: 10.1016/j.frl.2024.105934
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