Industrial policy and corporate investment efficiency

Bole Zhou and Shouguo Zhao

Journal of Asian Economics, 2022, vol. 78, issue C

Abstract: Drawing on the quasi-experiment formed by the revitalization plan of ten industries in China, this study empirically examines the impact of selective industrial policy on corporate investment efficiency within a difference-in-differences framework. The results show that the revitalization plan has a significant and negative effect on corporate investment efficiency by boosting over-investment while having little influence on under-investment. Further, we explore two potential channels underlying these findings, and find that the mediating effects of capital allocation efficiency and managerial overconfidence are significant. This study, therefore, demonstrates that the revitalization plan cannot effectively improve corporate investment efficiency, and has important implications for the use of selective industrial policy inside and outside China.

Keywords: Selective industrial policy; The revitalization plan; Corporate investment efficiency; Difference-in-differences method (search for similar items in EconPapers)
JEL-codes: D22 G11 L52 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:78:y:2022:i:c:s1049007821001354

DOI: 10.1016/j.asieco.2021.101406

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