GDP competition and corporate investment: Evidence from China
Qiang Liu
School of Economics and Business Administration, Chongqing University, Chongqing, China
Search for more papers by this authorCorresponding Author
Ying Hao
Business School, Beijing Normal University, Beijing, China
Correspondence
Ying Hao, Business School at Beijing Normal University, No. 175, Xinjiekouwai Street, Haidian District, Beijing 100875, China.
Email: cquhaoying@163.com
Search for more papers by this authorYong Du
College of Economics and Management, Southwest University, Chongqing, China
Search for more papers by this authorYuning Xing
College of Humanities and Development Studies, China Agricultural University, Beijing, China
Search for more papers by this authorQiang Liu
School of Economics and Business Administration, Chongqing University, Chongqing, China
Search for more papers by this authorCorresponding Author
Ying Hao
Business School, Beijing Normal University, Beijing, China
Correspondence
Ying Hao, Business School at Beijing Normal University, No. 175, Xinjiekouwai Street, Haidian District, Beijing 100875, China.
Email: cquhaoying@163.com
Search for more papers by this authorYong Du
College of Economics and Management, Southwest University, Chongqing, China
Search for more papers by this authorYuning Xing
College of Humanities and Development Studies, China Agricultural University, Beijing, China
Search for more papers by this authorFunding information: Ying Hao acknowledges financial support from the National Natural Science Foundation of China (grant number: 71872017,71372137,71872014 and 71772015) and Beijing Normal University Youth Fund (grant number: 2017hao). Yong Du gratefully acknowledges funding from the National Natural Science Foundation of China (grant number: 71572153)
Abstract
This study examines whether and how macroeconomic performance competition is related to investment at firm level. We use GDP competition as a proxy of dynamic macroeconomic conditions. We find that the effect of GDP competition on firm investments is significantly positive. We also find that GDP competition destroys investment efficiency significantly, especially by increasing overinvestment. Further tests show that GDP competition is more likely to affect the investment decisions of firms controlled by governments and firms located in regions with low marketization. In addition, our analyses reveal that the provincial officials facing competitive pressure are more likely to be promoted if firm investments accelerate. We use alternative proxies to measure GDP competition and find similar results that support our inference. Our findings support the notion that GDP competition of governments distorts investment behaviour. The present paper also elucidates investment problems and dilemmas faced by emerging economies.
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