Political governance and corporate investment efficiency in China

Lei Cheng and Yue Li

Applied Economics Letters, 2025, vol. 32, issue 12, 1709-1715

Abstract: The involvement of the Communist Party of China (CPC) in corporate decision-making has formed a governance model with ‘Chinese characteristics’ that diverges from commonly studied governance models. This paper provides direct insight into China’s political governance model by examining how the Party organization influences the investment efficiency of private firms. We find that increasing the proportion of Party directors (i.e. stronger political governance) improves the investment efficiency of private firms. This finding survives various robustness checks. The mediation analysis suggests that Party organizations promote corporate investment efficiency by playing advisory and supervisory roles in corporate governance. One policy implication is that, from the perspective of improving investment efficiency, the CPC should encourage private firms to invite more Party organization members to the board of directors, supervisory board, or management.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13504851.2024.2313555 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:32:y:2025:i:12:p:1709-1715

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504851.2024.2313555

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().