This study analyzes the impact of executive power on investment efficiency in Chinese State-Owned Enterprises (SOEs). Using a principal component analysis to measure executive power across four dimensions (organizational position, personal competence, industry influence, and prestige), and a regression model, the study finds a negative correlation between executive power and investment efficiency. The mechanisms include reduced financing constraints and increased diversification leading to inefficient investments. Equity concentration and independent director oversight positively moderate this relationship. The findings are robust to various robustness checks.

Yewei Huang, Junqin Qiu