Abstract
This study examines the impact of the Latin American Integrated Market (MILA for its Spanish acronym) on investment efficiency from 2003 to 2020. Our research suggests that MILA affects the efficiency of investment decisions by reducing information asymmetry and the agency problem. We present compelling empirical evidence that the impact of MILA on enhancing investment efficiency is especially pronounced in the over-investment problem. Furthermore, the mediation analysis reveals that firms listed on MILA stock exchanges have increased the efficiency of their investments, a result attributable partly to enhanced financial reporting quality. We employ difference-in-difference analysis to address the possibility of endogeneity. Our findings are validated by the fact that, compared with control firms, treatment firms improve their investment efficiency and mitigate the over-investment problem, thereby validating our findings.
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