Monetary policy tightening, accounting information comparability, and underinvestment: Evidence from China

Zhonghai Yang, Yang Lu and Wenhao Tan

Economic Analysis and Policy, 2021, vol. 70, issue C, 123-147

Abstract: Based on a macro and micro cross view, we empirically test the interactions among monetary policy, accounting information comparability, and investment efficiency with a sample of A-share listed firms in China from 2005 to 2019. We find that tightening monetary policy will aggravate underinvestment behavior, such as inefficient investment, while improvement in accounting information comparability can effectively mitigate the negative impact of tightening monetary policy on underinvestment, so as to improve firm investment efficiency. Further study shows that, in a period of monetary policy tightening, firms with high agency costs and high financing constraints can significantly reduce underinvestment by improving the comparability of accounting information, thus improving the investment efficiency of firms. After distinguishing the type of firm ownership (state-owned enterprises vs. private enterprises), we find that firms can reduce the effect of insufficient investment during a period of monetary tightening by improving the comparability of accounting information, which is more significant in the sample of private enterprises (PEs).

Keywords: Accounting information comparability; Investment efficiency; Monetary policy (search for similar items in EconPapers)
JEL-codes: G14 G32 M41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0313592621000254
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:70:y:2021:i:c:p:123-147

DOI: 10.1016/j.eap.2021.02.005

Access Statistics for this article

Economic Analysis and Policy is currently edited by Clevo Wilson

More articles in Economic Analysis and Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().