International Operation of Enterprises and Inefficient Investment: a Mitigating or Intensifying Effect?

Wenyuan Zhou (), Haiyan Zhong (), Zhongchi Wan (), Xiaoou Ma () and Xun Gong ()
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Wenyuan Zhou: Three Gorges University
Haiyan Zhong: Three Gorges University
Zhongchi Wan: Three Gorges University
Xiaoou Ma: Zhongnan University of Economics and Law
Xun Gong: Xi’an Innovation College of Yan’an University

Journal of the Knowledge Economy, 2024, vol. 15, issue 1, No 3, 47-62

Abstract: Abstract Corporate strategy affects inefficiency investment behavior and international operation of enterprises is a major component of corporate strategy. In this paper, an individual time-point double fixed effect model is applied into the operating sample data between 2014 and 2019 of 8519 Chinese international enterprises to explore how international operation affects inefficient investment. The results show that international operation can simultaneously mitigate over-investment and intensify under-investment, and is significantly negatively correlated with inefficient investment degree. It means international operation has the dual characteristics of an “intensifying effect” and a “mitigating effect” on investment efficiency, with an “overall effect” increasing it. Further research demonstrates that international operation can actively affect inefficient investment by the moderating effect of cash holding level, further effectively improving the inefficient investment behaviors; heterogeneity analysis indicates that good internal control and fierce product market competition can help curb the positive correlation between international operation and over-investment. This research enriches the field in terms of international operation of enterprises and investment behavior and offers referential significance regarding how to cope with the inefficient investment behavior.

Keywords: International operation; Inefficient investment; Ownership concentration; Cash holding (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s13132-022-01060-4

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