Social credit improvement and enterprise investment

Fei Ji, Weiming Liang, Xi Chen and Dongmin Kong

Finance Research Letters, 2025, vol. 71, issue C

Abstract: This research explores the effects of enhancing social credit on corporate investment, utilizing China's model city pilots for the Social Credit System Construction(SCSC) as a quasi-natural experiment. Our findings demonstrate that social credit improvement significantly increases enterprise investment levels, a conclusion supported by robustness tests. Mechanism analysis reveals that mitigating agency cost and enhancing debt financing are key factors driving increased corporate investment after the implementation of the SCSC. Heterogeneity results suggest that SCSC implementation is more effective for firms without political affiliation and with high institutional shareholding.

Keywords: Social credit system construction; Enterprise investment; Agency cost; Debt financing (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324013849

DOI: 10.1016/j.frl.2024.106355

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