The Impact of Political Connection and Information Asymmetry on Investment Efficiency: Evidence from China

Hui-Fun Yu, Tsui-Jung Lin, Hai-Yen Chang and Yu-Huai Wang
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Hui-Fun Yu: Department of Banking and Finance, Chinese Culture University, Taipei City 11114, Taiwan
Tsui-Jung Lin: Department of Banking and Finance, Chinese Culture University, Taipei City 11114, Taiwan
Hai-Yen Chang: Department of Banking and Finance, Chinese Culture University, Taipei City 11114, Taiwan
Yu-Huai Wang: Department of Banking and Finance, Chinese Culture University, Taipei City 11114, Taiwan

Sustainability, 2020, vol. 12, issue 14, 1-15

Abstract: This study investigates the impact of political connection and information asymmetry on the investment efficiency of firms in China. This paper employs a panel data regression analysis on a dataset comprising 4307 observations for listed companies from 2008 to 2015. The results indicate that if taken alone, neither political connection nor information asymmetry affects firms’ investment efficiency. However, the interactive effect of both political connection and information asymmetry significantly reduces firms’ investment efficiency. The results of this study help investors understand the forces that lead the Chinese firms to deviate from optimal investment decisions.

Keywords: political connection; information asymmetry; investment efficiency; China (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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