Industrial-Financial Cooperation and Corporate Invest-ment Efficiency:Quasi-natural Experiment Based on Pilot Cities
Investment activities are a crucial component of a firm's resource allocation process that creates wealth for shareholders.Efficient investment also serves as the microeconomic foundation for broader economic growth.Consequently,improving firm invest-ment efficiency has consistently been a focal point of interest.Many scholars argue that financing constraints faced by firms are key fac-tors that hinder investment efficiency.Limited access to external fi-nancing can lead to capital shortages,resulting in underinvestment.Additionally,information asymmetry between firms and external parties may lead to moral hazard and adverse selection,prompting management to misuse funds and causing overinvestment.The mechanisms underlying inefficient investment,whether it manifests as underinvestment or overinvestment,are fundamentally distinct,often rendering certain remedies counterproductive.Consequently,to effectively address the diverse inefficiencies in firm investment,it is imperative to employ a targeted approach,offering differentiat-ed financial support strategies tailored to the specific nature of the inefficiency in each case.It is important to guide financial resources through government policies to support the development of the real economy and en-hance firms'resource allocation efficiency.China is actively ex-ploring new paths for financial support to the real economy while introducing relevant financial policies.Specifically,promoting industrial-financial cooperation is a critical measure for guiding finance to support the real economy.This cooperation reflects the financial sector's support for the real economy and is an important topic of interest in both academia and industry.Scholars examined the impact of industrial-financial integration on firms'financing conditions,investment activities,and financial performance by using corporate ownership of financial institutions as a marker of this integration.However,industrial-financial integration,as just one form of industrial-financial cooperation,does not fully capture the broader concept of such cooperation.Moreover,the decision to engage in industrial-financial integration through equity stakes in financial institutions is an endogenous choice for firms,influenced by their financial strength and financing environment.This endoge-neity poses challenges for empirical analyses that rely on ownership relationships to study industrial-financial integration.Since direct evidence of the economic consequences of industrial-financial co-operation is relatively scarce,analyzing its effects and mechanisms is particularly valuable.In this study,the establishment of"National Industrial-Financial Cooperation Pilot Cities"has driven the development of industri-al-financial cooperation within the regions,establishing a mecha-nism for industrial-financial information matching.This provides an excellent exogenous shock for depicting micro-level industri-al-financial cooperation,effectively addressing the challenges of characterization and endogeneity.In order to explore whether the support from the financial department would improve the efficien-cy of resource distribution in the real economy,this paper uses the establishment of"National Industrial-financial Cooperation Pilot City"to construct a quasi-natural experiment,and investigate the impact of industrial-financial cooperation on corporate investment efficiency.The results show that industrial-financial cooperation leads the fi-nance sector to support the real economy and significantly improves corporate investment efficiency.In terms of influence mechanism,for under-invested firms,industrial-financial cooperation promotes corporate external financing activities,hence alleviating firms'underinvestment;for over-invested firms,industrial-financial co-operation inhibits corporate external financing activities,thereby reducing overinvestment.Besides,the effect of industrial-financial cooperation in improving corporate investment efficiency is more significant in firms with serious financing constraints or prominent information asymmetry.Further research shows that the higher the firm's growth,the more pronounced the role of industrial-fi-nancial cooperation in reducing underinvestment;the lower the firm's growth,the more pronounced the role of industrial-financial cooperation in restraining overinvestment.From the perspective of economic consequences,industrial-financial cooperation increas-es firms'value by improving corporate investment efficiency.In addition,the pilot of industrial-financial cooperation substantially promotes the development of industrial-financial integration and industrial-financial alliance.This study makes several key contributions to the existing literature.First,it addresses a critical gap in understanding industrial-finan-cial cooperation by offering a robust method to identify and mea-sure its impact at the micro level.Despite its prevalence in econom-ic activities,the difficulties in identifying such cooperation have left its economic consequences underexplored,leading to a lack of theoretical guidance.The establishment of"National Industrial-Fi-nancial Cooperation Pilot Cities"provides an exogenous shock,enabling this study to be the first to empirically assess the effect of industrial-financial cooperation on firm investment efficiency using quasi-natural experimental evidence.Second,this research enhanc-es our understanding of the determinants of firm investment effi-ciency.While prior studies have acknowledged the role of informa-tion asymmetry between firms and financial institutions,they have not fully explored the influence of industrial-financial cooperation.This paper highlights how industrial-financial cooperation can mit-igate underinvestment in resource-constrained firms and curb over-investment in others.Based on this,this article expands the research scope of factors affecting corporate investment efficiency.Third,this study offers timely insights into an ongoing policy debate:how to improve the effectiveness of financial services in supporting the real economy.As China deepens its structural reform of the finan-cial supply side,the findings suggest that industrial-financial co-operation plays a crucial role in aligning financial support with the specific needs of different firms,thereby addressing inefficiencies in investment.These results provide valuable policy implications for further advancing industrial-financial cooperation and contribute to the broader goal of optimizing financial resource allocation within the economy.This paper offers the following implications.First,to establish a system and mechanism for the financial sector to effectively sup-port the real economy,government departments should continue to expand the content and scope of industrial-financial cooperation pilot projects.This can guide financial capital to flow into the real economy and further improve the incentive efficiency of industri-al-financial cooperation policies,thus improving the efficient allo-cation of financial resources.Second,due to the varying impact of industrial-financial cooperation on different firms,firms'develop-ment status and financing needs should be accurately assessed,and the mechanisms of industrial-financial cooperation pilot projects should be refined.This encourages financial institutions to meet the reasonable financing needs of competitive and profitable firms.Third,various measures should be implemented to broaden firms'financing channels.In the ongoing efforts for industrial-financial cooperation,it is essential to fully utilize information technologies such as big data and cloud computing to continuously improve the information exchange and sharing mechanisms.Also,efforts should be made to reduce the cost for financial institutions to acquire in-formation,and alleviate the information asymmetry between firms and financial institutions.
Industrial-financial CooperationInvestment Efficien-cyFirm InvestmentServe to the Real EconomyQuasi-natural Experiment
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