How does credit market distortion affect corporate investment efficiency? The role of managerial forecast

Yizhong Wang, Lifang Chen, Ying Sophie Huang and Yong Li

Finance Research Letters, 2018, vol. 25, issue C, 266-273

Abstract: The purpose of this paper is to study the interaction among corporate investment efficiency, credit supply distortion and managerial forecast ability in China. We provide robust evidence that credit distortion adversely affects corporate investment efficiency, while better managerial forecast ability mitigates this negative effect. Subsample analyses show that managerial forecast ability mitigates the adverse effect of credit supply distortion for non-state-owned enterprises but not for state-owned enterprises. We also find evidence that negative credit supply distortions have a greater impact on corporate investment efficiency and managerial forecast ability is particularly important in reducing underinvestment.

Keywords: Investment efficiency; Credit distortion; Managerial forecast ability (search for similar items in EconPapers)
JEL-codes: D81 E22 E60 G18 G30 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:25:y:2018:i:c:p:266-273

DOI: 10.1016/j.frl.2017.11.004

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