Corporate Investment under Time-Space Compression: Evidence from High-Speed Railway Coverage

Abstract

The influence of geographical distance on the decision-making behaviors of economic entities is an interesting topic in new economic geography. To investigate the impact of high-speed railway coverage on firms, we considered high-speed railway coverage in China as a quasi-natural experiment, empirically explored the relation between the staggered coverage of high-speed railways and corporate investment using the data of the stations of Chinese high-speed railways and listed firms from 2009 to 2017and DID regression. Furthermore, grouping tests were conducted according to corporate operational efficiency and financing constraints. In addition, whether the investment of non-SOEs and labor-intensive firms improved due to high-speed railway coverage was analyzed. Results corroborate that the investment in listed firms in cities covered by high-speed railways increases more significantly compared with cities that are not covered. Hence, high-speed railway coverage promoted capital factor liquidity, mitigated financing constraints, and increased corporate investment. Moreover, high-speed railway coverage is more likely to optimize the investment of the groups of firms that have higher asset liquidity, lower financing constraints, intensive labor, or private ownership.The conclusion provides critical insights for the decision-making behaviors of high-speed railway construction and constitutes theoretical basis for the promotion effect of transportation infrastructure construction on corporate investment.