 Haste doesn't bring success: Top-down amplification of economic growth targets and enterprise overcapacityJiachun Chen, Xia Chen, Qingsong Hou and May Hu Journal of Corporate Finance, 2021, vol. 70, issue C Abstract: Using the data of Chinese industrial enterprises, we examine how the incentive to reach GDP growth targets affects the local firms' capacity utilization. We find that Chinese economic growth targets exhibit a persistent pattern of top-down amplification along different jurisdiction levels, which is associated with a decline in local firms' capacity utilization. Moreover, the effect of amplified targets on overcapacity is more pronounced (1) when officials utilize hard-constraint vocabulary in setting the economic growth target, (2) during the National Congress of Communist Party, and (3) when the age of prefecture-level officials is close to 55. We also find officials intervene local firms' capacity decisions by increasing private communication with local entities and loosening public policies for local firms within their jurisdictions. Further results show that the amplification of economic targets is detrimental to future development of both regional economy and local firms. Keywords: Chinese economic growth; Top-down amplification of GDP targets; Corporate overcapacity (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:70:y:2021:i:c:s0929119921001814 DOI: 10.1016/j.jcorpfin.2021.102059 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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