The Monkey King who wears a tight band: Executive accountability pressure and corporate investment

Jin Shen, Xiankun Deng and Qingsong Hou

Finance Research Letters, 2024, vol. 68, issue C

Abstract: This paper examines the effect of the accountability system for illegal operations and investments on subsidiary-level investments in Chinese state-owned enterprises (SOEs). Using the accountability system as a policy shock, we find that SOEs reduced the establishment of subsidiaries after the implementation of the accountability system, especially subsidiaries in cross-industry businesses. Furthermore, we find that this disincentive effect is more pronounced (1) when the chairman is close to retirement and (2) when the company has political affiliation. Our findings provide important implications for improving the SOE capital supervision system and promoting the high-quality development of SOEs.

Keywords: Accountability; Corporate investment; Subsidiary (search for similar items in EconPapers)
JEL-codes: G31 G34 G38 M12 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:68:y:2024:i:c:s1544612324010092

DOI: 10.1016/j.frl.2024.105979

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