Violation Punishment and Total Factor Productivity, Based on the Spillover Effect between Director-Interlocked Firms

Abstract

Using the sample of A-share listed firms in China from 2008 to 2019, we empirically test the spillover effect of violation punishment on the total factor productivity of director-interlocked firms. We find that violation punishment can significantly aggravate the violation of director-interlocked firms and preliminarily verify the spillover effect of violation punishment among director-interlocked firms. We also find that violation punishment will significantly reduce the total factor productivity of director-interlocked firms. The result is still stable after replacing the measurement method of total factor productivity, and its impact has a certain continuity, which can affect for two consecutive years. Further research shows that the R&D investment plays a mediation role between the violation punishment and the total factor productivity of the director interlocked firms. The violation punishment can reduce the R&D investment of the director-interlocked firms and then reduce the total factor productivity of the director-interlocked firms. In addition, after distinguishing the type of firm ownership, we find that compared with state-owned enterprises, violation punishment has a more significant inhibitory effect on the total factor productivity of private enterprises’ director-interlocked firms. Based on the perspective of the director network, we investigate the spillover effect of violation punishment on the total factor productivity of director-interlocked firms, which provides a new theoretical perspective for the in-depth understanding of the economic consequences of violation punishment, improves the total factor productivity of listed firms, and has important theoretical and practical significance.