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Government procurement and corporate investment: Evidence from China's A-share listed companies

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  • Xia, Jia
  • Wei, Wei

Abstract

Corporate investment serves as a crucial engine driving economic growth, and government procurement, as an important fiscal policy instrument, warrants in-depth investigation regarding its impact on corporate investment behavior. Based on micro-level data from China's A-share listed companies spanning 2015–2022, this empirical analysis demonstrates that government procurement significantly promotes corporate investment by enhancing supply chain stability and alleviating financing constraints. Heterogeneity analysis reveals that this effect is more pronounced among non-state-owned enterprises, firms without political connections, and enterprises operating in highly competitive markets. Further analysis indicates that while government procurement facilitates corporate physical investment, it also guides firms to reduce financial asset investment and enhances both investment efficiency and market value. These findings provide novel evidence for understanding the micro-level transmission mechanisms of government procurement policies, while offering important theoretical foundations and practical guidance for policymakers in optimizing government procurement system design, strengthening supply chain governance, promoting real economy development, and improving macroeconomic regulatory policy frameworks.

Suggested Citation

  • Xia, Jia & Wei, Wei, 2025. "Government procurement and corporate investment: Evidence from China's A-share listed companies," Economic Modelling, Elsevier, vol. 152(C).
    • Handle: RePEc:eee:ecmode:v:152:y:2025:i:c:s0264999325002664
    DOI: 10.1016/j.econmod.2025.107271
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    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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