The Impact Of Corruption And Its Governance On Enterprise Investment Efficiency

The 19th National Congress of the Communist Party of China clearly put forward that we must practice full and strict governance over the Party,improve the Party's political ecosystem,resolutely correct misconduct in all its forms,take firm action to "take out tigers?swat flies?hunt down foxes" and show zero tolerance for corruption,which is another high-pressure anti-corruption situation released by the Central Committee after the 18th Party's Congress's proposal to firmly push forward full and strict governance over the Party,insist ideological work and institution building,severely punish corruption and purify the political ecology within the Party.With a batch of sacked officials and corporate executives,corporate corruption has also attracted wide attention.Investment activity is one of the important financial activities of an enterprise.Meanwhile,effective investment is the guarantee and motive force for the long-term stable development of an enterprise.At present,China's economy has entered a new normal state.Therefore,it is particularly important to ensure and enhance the investment efficiency of enterprises under the background of economic growth transformation and heavy operation burden.At the same time,taking into account the economic system of our country is not perfect,the paper further introduces two variables of the property rights and the political association,to explore the different effects of state-owned enterprises and non state-owned enterprises as well as the influence of political connection on corruption and its governance and corporate investment efficiency.Firstly,this paper reviews relevant literatures on corporate investment efficiency,corruption and its governance,and the relationship between corruption and its govenrance and corporate investment efficiency.Secondly,based on the principal-agent theory,the information asymmetry theory and the free cash flow theory,we analyze the influence mechanism of corruption and its governance on the efficiency of enterprise investment,and further puts forward the research hypothesis on the basis of theoretical analysis.Then,we use the regression residuals of Richardson(2006)expected investment model to measure the level of enterprise investment efficiency.And on the basis of panel random effect model,this paper empirically examines the impact of corruption and its governance on the investment efficiency of enterprises from three perspectives:the overall inefficient investment level,overinvestment and underinvestment.Also,we examine the influence of corruption governance on the relationship between corruption and enterprise investment efficiency,and further test the different effects of property rights and political connection on the relationship between corporate corruption and enterprise investment efficiency.The results show that:(1)corruption seriously reduces the investment efficiency of the enterprise,including the level of overall inefficiency,underinvestment and overinvestment.,and the adverse effects of corruption on enterprise investment efficiency are more obvious in the state-owned enterprises and the enterprises with political connections.(2)corruption governance has a positive effect on the improvement of enterprise investment efficiency,including alleviating underinvestment and restraining overinvestment.(3)However,corruption governance is a systematic and long-term project,and the series of corruption governance activities launched since the eighteen major stages have not yet effectively played a negative role in restraining corruption from investment efficiency at present.The robustness test results further show that the effect does not have hysteresis and coherence.And in the long run,corruption governance have positive effects on improving inefficient investment caused by corruption.