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Institutional environment, credit risk expectations, and firms' investment strategies

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  • Wei, Xiaohui
  • Li, Jian
  • Li, Yuanhaocheng

Abstract

Using data from Chinese A-share listed companies between 2011 and 2023, this study examines the impact of enhancing institutional environments on corporate investment plans. Findings reveal that enhancing the institutional environment can influence firms’ investment strategies, specifically enhancing firms' tangible investments while reducing financialization. Subsequent analysis reveals that a superior institutional framework can reduce credit spreads, improve credit risk perceptions, and shift firms from the real sector to the financial sector. This study offers policy recommendations for constructing an institutional environment that facilitates investment structure.

Suggested Citation

  • Wei, Xiaohui & Li, Jian & Li, Yuanhaocheng, 2025. "Institutional environment, credit risk expectations, and firms' investment strategies," Finance Research Letters, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325006312
    DOI: 10.1016/j.frl.2025.107371
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    References listed on IDEAS

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    1. Filip Hampl & Dagmar Vágnerová Linnertová, 2026. "Does Context Matter? ESG‐Contingent Effects of Board Cultural Diversity on Corporate Capital Investments," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 33(1), pages 236-259, January.

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