How does investment efficiency affect financial distress risk? Evidence from China

IF 4.3 2区经济学 Q1 BUSINESS, FINANCE

Journal of Behavioral and Experimental Finance Pub Date : 2025-01-22 DOI:10.1016/j.jbef.2025.101024

Huixia Geng , Hongbing Zhu , Wei Theng Lau , Normaziah Mohd Nor , Nazrul Hisyam Ab Razak

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引用次数: 0

Abstract

Motivated by the high financial distress risk (Hereafter, FDR) level and extensively inefficient investment behaviors in China, this paper aims to explore the relationship between firms’ investment efficiency and FDR. Utilizing Chinese A-share market data spanning 2008–2020, we find that over-investment linearly exacerbates FDR, while under-investment has a U-shaped relationship with FDR. Detecting the underlying mechanisms, we find that over-investment exacerbates FDR through linearly declining firms’ cash holding and investing cash flow while increasing firms financing cash flow, and under-investment impacts FDR through the inverted U-shaped relationship with operating cash flow and U-shaped relationship with firms’ financing cash flow. Our findings hold up well after various robustness tests, providing new implications of firm life circle theory and static trade-off theory in the process of investment efficiency influencing FDR.

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投资效率如何影响财务困境风险？来自中国的证据

在中国财务困境风险（以下简称FDR）水平较高、投资行为普遍低效的背景下，本文旨在探讨企业投资效率与FDR之间的关系。利用2008-2020年的中国a股市场数据，我们发现过度投资线性加剧了FDR，而投资不足与FDR呈u型关系。研究发现，过度投资通过线性降低企业的现金持有量和投资现金流而加剧了FDR，同时增加了企业的融资现金流；投资不足通过与经营现金流和融资现金流的倒u型关系影响FDR。我们的研究结果在各种稳健性检验后都得到了很好的证明，为企业生命周期理论和静态权衡理论在投资效率影响FDR过程中的研究提供了新的启示。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Behavioral and Experimental Finance BUSINESS, FINANCE-

CiteScore

13.20

自引率

6.10%

发文量

审稿时长

69 days

期刊介绍： Behavioral and Experimental Finance represent lenses and approaches through which we can view financial decision-making. The aim of the journal is to publish high quality research in all fields of finance, where such research is carried out with a behavioral perspective and / or is carried out via experimental methods. It is open to but not limited to papers which cover investigations of biases, the role of various neurological markers in financial decision making, national and organizational culture as it impacts financial decision making, sentiment and asset pricing, the design and implementation of experiments to investigate financial decision making and trading, methodological experiments, and natural experiments. Journal of Behavioral and Experimental Finance welcomes full-length and short letter papers in the area of behavioral finance and experimental finance. The focus is on rapid dissemination of high-impact research in these areas.