Executive accountability systems and the financial investments of state-owned enterprises in China

Guoqiang Hu, Wenxiang Sun, Yuanzheng Xu and Hong-an Mao

Pacific-Basin Finance Journal, 2025, vol. 91, issue C

Abstract: This study examines the impact of executive accountability systems on the financial investments of state-owned enterprises (SOEs). Utilizing the staggered regional implementation of the Accountability System for Irregular Operations and Investments (ASIOI) in Chinese SOEs as an exogenous shock and a difference-in-differences design, we observe a significant reduction in SOEs' financial investments after the implementation of the ASIOI. Further analysis reveals that mitigating managerial myopia and strengthening internal control are potential mechanisms through which the ASIOI affects SOEs' financial investments. Cross-sectional tests show that the ASIOI's effects are more pronounced in SOEs with more intense market competition, shorter chairperson tenures, lower financing constraints, and higher agency costs. Moreover, the ASIOI reduces over-investment and speculative investment in financial assets while enhancing core business performance. Overall, our findings highlight the positive impact of executive accountability systems on corporate financial investments and the implications of improving resource allocation efficiency in SOEs.

Keywords: Accountability; Accountability system for irregular operations and investments; Financial investments; State-owned enterprises; Government regulation; China (search for similar items in EconPapers)
JEL-codes: D22 D24 G38 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:91:y:2025:i:c:s0927538x25000393

DOI: 10.1016/j.pacfin.2025.102702

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