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Does the administrative approval reform impact firm's investment decisions?

Author

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  • Cheng, Bo
  • Guo, Zhuming
  • Xiong, Ting
  • Qiu, Baoyin

Abstract

By leveraging the quasi-natural experiment of the "Without the Need for a Second Trip" reform in Zhejiang province, China, in 2016, this paper examines the impact of government examination and approval reform on corporate investment decisions. We find that the firm's investment level has increased by about 2 times after the government examination and approval reform than that before the reform. The result remains after a series of robustness tests. Our evidence suggests that increased government efficiency has significantly increased the sensitivity of firm investment and investment opportunities. Further analysis shows that the government examination and approval reform has created a favorable business environment for firm investment, which reduces the information cost of firm investment and enhances the flexibility of corporate investment decision making.

Suggested Citation

  • Cheng, Bo & Guo, Zhuming & Xiong, Ting & Qiu, Baoyin, 2023. "Does the administrative approval reform impact firm's investment decisions?," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 1052-1067.
    • Handle: RePEc:eee:reveco:v:88:y:2023:i:c:p:1052-1067
    DOI: 10.1016/j.iref.2023.07.034
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    More about this item

    Keywords

    Government examination and approval reform; Investment decisions; Government efficiency; Business environment;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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