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The impact of inclusion in the MSCI EM index on firms' investment efficiency：Evidence from China

Author

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  • Dong, Shizheng
  • Liu, Jiacheng
  • Zhang, Yuexing
  • Tian, Qian
  • Yan, Junzhou

Abstract

This paper investigates the impact of A-share inclusion in the MSCI index on corporate investment efficiency. Using the inclusion of A-shares in the MSCI index on June 1, 2018 as a quasi-natural experiment, the results of the PSM-DID model show that the inclusion of A-shares in the MSCI index significantly reduces corporate investment efficiency. Further analysis reveals that inefficient investment mainly occurs in over-invested firms, non-state-owned firms, and firms audited by Big 4 accounting firms. Firms with low managerial ownership and high degree of surplus management are more likely to overinvest after A-share inclusion in the MSCI index, which leads to a decrease in investment efficiency. Firms with high analyst attention and low equity checks and balances increase their investment after A-share inclusion in the MSCI index, and the influences of decision-making power and control can be the triggers to reduce investment efficiency.

Suggested Citation

  • Dong, Shizheng & Liu, Jiacheng & Zhang, Yuexing & Tian, Qian & Yan, Junzhou, 2025. "The impact of inclusion in the MSCI EM index on firms' investment efficiency：Evidence from China," Research in International Business and Finance, Elsevier, vol. 73(PB).
    • Handle: RePEc:eee:riibaf:v:73:y:2025:i:pb:s0275531924004288
    DOI: 10.1016/j.ribaf.2024.102635
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    More about this item

    Keywords

    Capital market; MSCI Index; Investment efficiency;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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