, 1, 2
9282 
8609During the period of economic transition, there is a phenomenon that China experiences a long period of overcapacity and excessive investment. Sustained overcapacity leads to the unbalanced industrial structure, heavy corporate debt, and low economic efficiency. The essence of excess capacity is the overinvestment behavior of micro enterprises. The existing literature has studied the phenomenon of overcapacity and overinvestment, forming two viewpoints: " market failure” and " government failure”. China has gradually established its own economic system in the period of economic transition. Under the system of fiscal decentralization and political centralization, the contract of China’s economic system is decomposed into local governments through layer upon layer of contracting. For economic and political reasons, competition among regions at the same level leads to the short-term behavior. Local governments have the motivation and ability to use their resources to intervene in corporate investment activities in their jurisdictions. Based on the special economic system of regional competition, this paper uses the data of listed companies to test the influence of the economic catch-up pressure faced by local governments on the overinvestment behavior of enterprises in the region. Firstly, we select China listed companies as samples during 2002-2015 years, and use three methods to measure the degree of overinvestment. Secondly, we take per capita GDP, per capita fiscal revenue as independent variables to test the impact of local economic catch-up pressure on the overinvestment of enterprises in the area. Then we use land price to measure the distorted degree of regional land resource allocation, and use the mediating effect model to examine the mediating role of distortion of factor allocation. Finally, we examine the moderating effect of the ownership structure, market competition and political connection on the impact of economic catch-up pressure on the overinvestment behavior of enterprises in the area. We find that:（1）There is a significant negative correlation between per capita GDP, per capita fiscal revenue and the overinvestment level of enterprises. There is a significant positive correlation between the ranking of GDP, fiscal revenue and the overinvestment level.（2）Economic catch-up pressure causes land price distortion. Land price distortion plays an intermediary role in the influence of economic catch-up pressure on overinvestment.（3）The balance of the ownership structure and external market competition can effectively limit the overinvestment behavior of enterprises, and the overinvestment of enterprises with political connections is even more serious. Based on China’s special economic system, this paper reveals the influence of local governments’ economic catch-up pressure on the investment behavior of enterprises in the region from the perspective of regional competition. This study provides a meaningful reference for the formation mechanism of overinvestment in micro enterprises and the resolution of macro capacity surplus.
/ Journals / Foreign Economics & Management
Foreign Economics & Management
LiZengquan, Editor-in-Chief
ZhengChunrong, Vice Executive Editor-in-Chief
YinHuifang HeXiaogang LiuJianguo, Vice Editor-in-Chief
The Impact of Catch-up Pressure on Overinvestment by Enterprises in the Jurisdiction of Local Governments
Foreign Economics & Management Vol. 40, Issue 10, pp. 122 - 138 (2018) DOI:10.16538/j.cnki.fem.2018.10.010
Summary
References
Summary
[1] Macroeconomic Study Group, CCER. Property Rights, Inefficient Investment and Deflation[J]. Economic Research Journal, 2004(9):26-35.
[2] Chunfang Cao, Lianfu Ma, Xiaoxiu Shen. Fiscal Pressure, Promotion Pressure, Tenure of Office and Local State-owned Companies’ Overinvestment[J]. China Economic Quarterly, 2014, 13(4):1415-1436.
[3] Qiang Geng, Feitao Jiang, Tan Fu. Policy-related Subsides, Overcapacity and China’s Economic Fluctuation
——Empirical Testing Based on RBC Model[J]. China Industrial Economics, 2011(5):27-36.
[4] Xiaogang He, Hao Deng, Shiyu Wu, Peng Liang. Overtaking Pressure and Corporate Moral Failure——Data Analysis from Chinese Listed Companies [J]. Management World, 2015(9):104-124.
[5] Jianbai Huang, Zhen Xu, Shan Xu. Land Price Distortion, Enterprises’ Property and Over-investment——An Empirical Research Based on the Data of Chinese Industrial Enterprises and Land Price of Cities in China[J]. China Industrial Economics, 2015(3):57-69.
[6] Feitao Jiang, Jianhai Cao. Market Failure or Institutional Weaknesses——The Argument, Defect and New Development in Research of Redundant Construction Formation Mechanism[J]. China Industrial Economics, 2009(1):53-64.
[7] Feitao Jiang, Qiang Geng, Daguo Lv, Xiaoping Li. Mechanism of Excess Capacity Based on China’s Regional Competition and Market Distortion[J]. China Industrial Economics, 2012(6):44-56.
[8] Economic Growth Frontier Subject Team. High Growth of Investment, Macro-cost and the Sustainability of Economic Growth[J]. Economic Research Journal, 2005(10):12-23.
[9] Jingming Li, Xia Tang. Over-Investment of the State Owned Enterprises in China: A Theoretical Explanation from the Perspective of Production Factors Input[J]. The Theory and Practice of Finance and Economics, 2011, 32(4):46-50.
[10] Justin Yifu Lin, Ho-Mou Wu, Yiqing Xing. Wave Phenomena and Formation of Excess Capacity[J]. Economic Research Journal, 2010(10):4-19.
[11] Bin Liu, Lihua Yuan. Land Resources Obtaining, Equity Investment Increase and Enterprise Overinvestment[J]. Nankai Business Review, 2016, 19(2):75-86.
[12] Zheng Lv, Jianhai Cao. Does Competition Always Produce Efficiency?——Also on the Theoretical Basis of Excessive Competition[J]. Social Sciences in China, 2000(6):4-14.
[13] Yan Tan, Yanyan Chen, Jinsong Tan, Yuqiang Zhang. The Number of Local Listed Companies, Economic Influence and Overinvestment[J]. Accounting Research, 2011(4):43-51.
[14] Xuesong Tang, Xiaosu Zhou, Rujing Ma. Government Intervention, GDP Growth and Overinvestment by Local State-owned Enterprises[J]. Journal of Financial Research, 2010(8):99-112.
[15] János Kornai. The Socialist System[M]. Central Compilation & Translation Press, 2008.
[16] Donghua Yu, Yinan Lv. Government Improper Intervention and Overcapacity of Strategic Emerging Industries——A Case Study of Chinese Photovoltaic Industry[J]. China Industrial Economics, 2015(10):53-68.
[17] Steven N.S. Cheung. The Economic System of China[M]. China Citic Press, 2009.
[18] Research Group on China’s Economic Growth and Macroeconomic Stability. Capitalization Expansion and Technological Progress of Catch-up Economy[J]. Economic Research Journal, 2010(5):43-47.
[19] Li-an Zhou. Governing China’s Local Officials: An Analysis of Promotion Tournament Model[J]. Economic Research Journal, 2007(7):36-50.
[20] Yeliang Zhou, Wenjun Sheng. Cause Analysis and Policy Choice of Overcapacity in China During the Transitional Period[J]. Journal of Financial Research, 2007(2):183-190.
[21] Biddle G C, Hilary G, Verdi R S. How does financial reporting quality relate to investment efficiency?[J]. Journal of Accounting and Economics, 2009, 48(2-3): 112-131.
[22] Chen S M, Sun Z, Tang S, et al. Government intervention and investment efficiency: Evidence from China[J]. Journal of Corporate Finance, 2011, 17(2): 259-271.
[23] Dixit A K, Stiglitz J E. Monopolistic competition and optimum product diversity[J]. American Economic Review, 1977, 67(3): 297-308.
[24] Richardson S. Over-investment of free cash flow[J]. Review of Accounting Studies, 2006, 11(2-3): 159-189.
[25] Romer P M. Increasing returns and long-run growth[J]. Journal of Political Economy, 1986, 94(5): 1002-1037.
Cite this article
Xu Guangwei, Tan Jin, Sun Zheng. The Impact of Catch-up Pressure on Overinvestment by Enterprises in the Jurisdiction of Local Governments[J]. Foreign Economics & Management, 2018, 40(10): 122-138.
Export Citations as:
For
