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The Impact of Political Connection and Information Asymmetry on Investment Efficiency: Evidence from China

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  • Hui-Fun Yu

    (Department of Banking and Finance, Chinese Culture University, Taipei City 11114, Taiwan)

  • Tsui-Jung Lin

    (Department of Banking and Finance, Chinese Culture University, Taipei City 11114, Taiwan)

  • Hai-Yen Chang

    (Department of Banking and Finance, Chinese Culture University, Taipei City 11114, Taiwan)

  • Yu-Huai Wang

    (Department of Banking and Finance, Chinese Culture University, Taipei City 11114, Taiwan)

Abstract

This study investigates the impact of political connection and information asymmetry on the investment efficiency of firms in China. This paper employs a panel data regression analysis on a dataset comprising 4307 observations for listed companies from 2008 to 2015. The results indicate that if taken alone, neither political connection nor information asymmetry affects firms’ investment efficiency. However, the interactive effect of both political connection and information asymmetry significantly reduces firms’ investment efficiency. The results of this study help investors understand the forces that lead the Chinese firms to deviate from optimal investment decisions.

Suggested Citation

  • Hui-Fun Yu & Tsui-Jung Lin & Hai-Yen Chang & Yu-Huai Wang, 2020. "The Impact of Political Connection and Information Asymmetry on Investment Efficiency: Evidence from China," Sustainability, MDPI, vol. 12(14), pages 1-15, July.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:14:p:5607-:d:383567
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