Impact of political connections on constructing a unified national market: Evidence from inter-regional capital flows

IF 7.5 1区经济学 Q1 BUSINESS, FINANCE

International Review of Financial Analysis Pub Date : 2025-05-11 DOI:10.1016/j.irfa.2025.104331

Mengfei Wan , Li Li

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引用次数: 0

Abstract

An essential form of capital flow, inter-regional investment consistently promotes regional coordination while accelerating economic development. In China, it is a key force in constructing a unified national market. As informal institutions, political connections can impact corporate investment decisions. This study examines panel data from Chinese A-share firms listed on the Shanghai and Shenzhen stock exchanges, focusing on the geographic diversification of investments. We investigate the impact of political connections on constructing a unified national market. Political connections reduce inter-regional investment and slow the construction of a unified national market. This effect operates through the mechanisms of higher rent-seeking costs and policy “burdens”. A lack of cross-provincial tenure among officials, high local fiscal deficits, and high regional unemployment rates significantly increase the negative impact of political connections on firms' cross-regional subsidiary distribution. Further analysis indicates that the negative effects of political connections on inter-regional investment are more pronounced in regions with lower levels of marketization and stronger local protectionism. The conclusions of this study augment the understanding of how political connections affect corporate decision-making and capital flows across regions, providing essential insights for advancing the construction of a unified national market.

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政治联系对构建统一的国家市场的影响：来自区域间资本流动的证据

区域间投资是资本流动的重要形式，在促进经济发展的同时不断促进区域协调。在中国，它是建设全国统一市场的关键力量。作为非正式机构，政治关系可以影响企业的投资决策。本研究考察了在上海和深圳证券交易所上市的中国a股公司的面板数据，重点关注投资的地域多样化。我们研究了政治关系对构建统一的国家市场的影响。政治联系减少了地区间的投资，减缓了统一国家市场的建设。这种效应通过更高的寻租成本和政策“负担”机制发挥作用。缺乏跨省任职的官员、高地方财政赤字和高地区失业率显著增加了政治关系对企业跨地区子公司分布的负面影响。进一步分析表明，在市场化程度较低、地方保护主义较强的地区，政治关系对区域间投资的负面影响更为明显。本研究的结论增加了对政治关系如何影响企业决策和跨地区资本流动的理解，为推进全国统一市场的建设提供了重要的见解。

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

International Review of Financial Analysis BUSINESS, FINANCE-

CiteScore

10.30

自引率

9.80%

发文量

366

期刊介绍： The International Review of Financial Analysis (IRFA) is an impartial refereed journal designed to serve as a platform for high-quality financial research. It welcomes a diverse range of financial research topics and maintains an unbiased selection process. While not limited to U.S.-centric subjects, IRFA, as its title suggests, is open to valuable research contributions from around the world.