Fiscal decentralization and corporate investment: empirical evidence from China. Issue 1 (2nd January 2019)

• Record Type: Journal Article
• Authors: Gao, Shenghao; Wang, Liming; Liu, Ningyue; Zhang, Min
• Is Part Of: Journal of economic policy reform. Volume 22:Issue 1(2019)
• Page Start: 51
• Page End: 68
• Publication Date: 2019-01-02
• Subjects: fiscal decentralization -- corporate investment -- corporate ownership -- economic consequence; E62 -- G38 -- H32; Economic policy -- Periodicals; Commercial policy -- Periodicals; Monetary policy -- Periodicals; International trade -- Periodicals; Developing countries -- Economic policy -- Periodicals; Former Soviet republics -- Economic policy -- Periodicals; Post-communism -- Periodicals; Policy sciences -- Periodicals; 338.9
• DOI: 10.1080/17487870.2017.1310042
• Languages: English
• ISSNs: 1748-7870

Abstract

Abstract : This paper examines the effect of fiscal decentralization on levels and efficiency of corporate investment. The results indicate that as the extent of local government fiscal decentralization increases, the level of new investment by firms under their jurisdiction rises. Furthermore, fiscal decentralization has an impact on corporate investment by aggravating over-investment rather than alleviating under-investment, leading to a situation whereby fiscal decentralization is negatively associated with investment efficiency at the level of the firm. Finally, the impact of fiscal decentralization on over-investment, under-investment and investment efficiency is not different between state-owned enterprises and non-state-owned enterprises, suggesting that economic leverages are the dominant government intervention measures. The findings imply that fiscal decentralization is another determinant of firm-level investment and corporate investment efficiency, which broadens the existing literature on the economic consequence of fiscal decentralization, resulting in important implications for policy-making.