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The Monkey King who wears a tight band: Executive accountability pressure and corporate investment

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  • Shen, Jin
  • Deng, Xiankun
  • Hou, Qingsong

Abstract

This paper examines the effect of the accountability system for illegal operations and investments on subsidiary-level investments in Chinese state-owned enterprises (SOEs). Using the accountability system as a policy shock, we find that SOEs reduced the establishment of subsidiaries after the implementation of the accountability system, especially subsidiaries in cross-industry businesses. Furthermore, we find that this disincentive effect is more pronounced (1) when the chairman is close to retirement and (2) when the company has political affiliation. Our findings provide important implications for improving the SOE capital supervision system and promoting the high-quality development of SOEs.

Suggested Citation

  • Shen, Jin & Deng, Xiankun & Hou, Qingsong, 2024. "The Monkey King who wears a tight band: Executive accountability pressure and corporate investment," Finance Research Letters, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:finlet:v:68:y:2024:i:c:s1544612324010092
    DOI: 10.1016/j.frl.2024.105979
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    More about this item

    Keywords

    Accountability; Corporate investment; Subsidiary;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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