The impact of inclusion in the MSCI EM index on firms' investment efficiency：Evidence from China

Shizheng Dong, Jiacheng Liu, Yuexing Zhang, Qian Tian and Junzhou Yan

Research in International Business and Finance, 2025, vol. 73, issue PB

Abstract: This paper investigates the impact of A-share inclusion in the MSCI index on corporate investment efficiency. Using the inclusion of A-shares in the MSCI index on June 1, 2018 as a quasi-natural experiment, the results of the PSM-DID model show that the inclusion of A-shares in the MSCI index significantly reduces corporate investment efficiency. Further analysis reveals that inefficient investment mainly occurs in over-invested firms, non-state-owned firms, and firms audited by Big 4 accounting firms. Firms with low managerial ownership and high degree of surplus management are more likely to overinvest after A-share inclusion in the MSCI index, which leads to a decrease in investment efficiency. Firms with high analyst attention and low equity checks and balances increase their investment after A-share inclusion in the MSCI index, and the influences of decision-making power and control can be the triggers to reduce investment efficiency.

Keywords: Capital market; MSCI Index; Investment efficiency (search for similar items in EconPapers)
JEL-codes: G15 G30 G38 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:73:y:2025:i:pb:s0275531924004288

DOI: 10.1016/j.ribaf.2024.102635

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