Economic policy uncertainty and corporate investment efficiency: Evidence from China - Based on panel data

Abstract

This paper studies the impact of economic policy uncertainty on corporate investment efficiency. The study finds that economic policy uncertainty has a significantly positive impact on corporate investment efficiency. In addition, the positive relationship is still robust after conducting a series of robustness checks. Further analyses show that the impact of economic policy uncertainty on corporate investment efficiency is more pronounced in firms that do not employ Big 4 auditors, are non-state-owned, and have fewer analysts. By exploring the economic channel, this study shows that economic policy uncertainty is related to higher information disclosure quality. Firms with higher information disclosure quality tend to improve their corporate investment efficiency when economic policy uncertainty increases. Findings show that the increase in economic policy uncertainty in China's capital market can improve corporate information disclosure quality and further improve corporate investment efficiency.