Corporate Investment in China

Background, practice and research

Authored by: Gongfu Zhang , Yi Wang , Xu Lou , Xiaohui Zhang

The Routledge Companion to Accounting in China

Print publication date:  September  2018
Online publication date:  September  2018

Print ISBN: 9781138678538
eBook ISBN: 9781315558899
Adobe ISBN:

10.4324/9781315558899-2

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Abstract

This chapter investigates the institutional background, practice and academic research of investment in China. As a transition country, the institutional background of China is quite different from developed countries. The primary role of top management in State-owned enterprises in making investments has not been completely established, and the government still plays an important role in intervening corporate investments through government planning and many other indirect macroeconomic controls. Investment practice in Chinese enterprises currently is characterized with the rapid growth of enterprise investment and the low-return on investment. Chinese scholars have conducted both theoretical and empirical researches on enterprise investment efficiency, determinants and economic consequences of corporate investment. These studies find that corporate investment efficiency in China is generally low, demonstrating either under- or over-investment. Such inefficient investment impairs corporate value. Moreover, government intervention, political connections, agency problem, information asymmetry as well as market competition could directly or indirectly influence corporate investment decision. We expect future research on corporate investment in China will be characterized with continuous development of new research perspectives, the introduction of new methodology and the extension of research objects to unlisted companies.

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