1. Do firms’ pension contributions decrease their investment efficiency in Chinese context?
- Author
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Jin Wang, Deli Wang, Hai Long, and Yu Chen
- Subjects
pension contributions ,chinese pension policies ,investment efficiency ,chinese listed firms ,inefficient investment ,Management. Industrial management ,HD28-70 ,Business ,HF5001-6182 - Abstract
Purpose: This research aims to investigate whether increasing the pension contributions of a firm leads to inefficient investments. Design/methodology/approach: Based on the 26 135 observations of the Chinese listed firms, this study employs ordinary least squares models to investigate the relationship between pension costs and inefficient investments. Findings/results: This study shows that Chinese listed firms’ pension contribution increments result in fewer investment opportunities and a decreased in investment efficiency. This is insignificant for the more profitable firms and state-owned enterprises. It suggests further that a firm’s pension cost is significantly associated with its investment inefficiency, particularly for cash flow dominated and financing–restricted firms. This indicates a negative association between pension contributions and cash flows, and several pension contributions may lead to a cash flow shortage in the firms. Practical implications: For managers, they should improve their investment efficiency within an affordable pension plan; for investors, increasing pension costs potentially decrease their investment returns. Originality/value: Some findings have reference values for some developing countries.
- Published
- 2023
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