Provincial economic growth and firm excess investment: Evidence from China

Jianhua Liu, Jingjun Liu, Zhenyang Tang and Yue Xu

Economic Modelling, 2024, vol. 137, issue C

Abstract: Local governments in China frequently report provincial economic growth rates that exceed their targets. Prior studies suggest that this phenomenon is attributable to governmental influence over local firms, particularly through coercing these firms into escalating investments to maximize economic expansion. Using a sample of 18,349 Chinese listed firms from 2001 to 2017, we find that firms located in regions that exceed economic growth targets tend to invest more heavily. This effect is more pronounced in years when local government officials face stronger promotion pressure; furthermore, excess economic growth is associated with diminished investment efficiency within firms and increased government subsidies. These findings suggest that excess economic growth proxies for local government opportunism and plays an important role in local firms’ investment decisions.

Keywords: Investment; Investment efficiency; GDP growth; Excess economic growth; Government intervention (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999324001202
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:ecmode:v:137:y:2024:i:c:s0264999324001202

DOI: 10.1016/j.econmod.2024.106764

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

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