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The impact of transportation network development on firm investment decisions: Evidence from China

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  • Lu, Mengting
  • Shu, Haibing

Abstract

This paper examines whether transportation network development, particularly commuting time affects firm investment decisions, including investment breadth and depth. We find that when the commuting time drops at a given distance, the parent company tends to not only invest in more subsidiaries and in more diverse industries but also invest more in subsidiaries. Moreover, we find commuting time is negatively correlated with the probability of executives taking concurrent appointments and the parent company guaranteeing its subsidiaries, suggesting that distant commutes lead to greater supervision costs and higher information asymmetry. At last, we find that SOEs and large firms are more sensitive to commuting time regarding investment breadth than non-SOEs and small firms but less sensitive in investment amount.

Suggested Citation

  • Lu, Mengting & Shu, Haibing, 2026. "The impact of transportation network development on firm investment decisions: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:pacfin:v:95:y:2026:i:c:s0927538x2500321x
    DOI: 10.1016/j.pacfin.2025.102984
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    JEL classification:

    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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