Dialect Diversity, Uncertainty and Corporate Investment Efficiency

This research empirically examines how dialect diversity influences corporate investment efficiency under different levels of economic policy uncertainty (EPU). Our findings reveal that local dialect diversity enhances investment efficiency during stable periods, but this advantage significantly diminishes under high EPU. This reduction primarily arises from underinvestment and overly cautious decision‐making by fragmented management during periods of turmoil. Further analysis indicates that this decline is exacerbated by stronger internal governance, which emphasizes checks and balances, and mitigated by stronger external governance, which focuses on supervisory power. Our findings remain robust when adopting alternative measures of key variables and utilizing topography as an instrumental variable.