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Fair competition review and inefficient investment of enterprises: Mediating effect based on auditor reputation

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  • Lin, Yuya
  • Li, Aijun

Abstract

This paper employs the implementation of China’s fair competition review system in 2017 as a quasi-natural experiment to examine the causal effect of competition policy on corporate investment efficiency and its boundary conditions. Based on a difference-in-differences estimation using data from A-share listed companies from 2011 to 2023, the results indicate that the system significantly curbs inefficient corporate investment. Mediation tests reveal that auditor reputation plays a partial mediating role, suggesting that the policy enhances external governance constraints by increasing the demand for high-quality auditing. Moderating effect analysis shows that the level of marketization positively reinforces the policy’s effectiveness—the more developed the market mechanisms, the more fully the system corrects administrative distortions. Furthermore, the policy’s impact is more pronounced in industries with greater competition and weaker regulatory attributes.

Suggested Citation

  • Lin, Yuya & Li, Aijun, 2026. "Fair competition review and inefficient investment of enterprises: Mediating effect based on auditor reputation," Finance Research Letters, Elsevier, vol. 106(C).
    • Handle: RePEc:eee:finlet:v:106:y:2026:i:c:s1544612326007944
    DOI: 10.1016/j.frl.2026.110266
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    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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