Land and resources acquisition, equity investment increase and enterprise overinvestment

Abstract

Purpose

This paper comes to the point from the tax competition of local government in investment promotion and capital introduction. This paper aims to empirically examine the internal mechanism of enterprises obtaining land resources from local government and its resulting equity investment increase and economic consequences of overinvestment.

Design/methodology/approach

The data of China’s A-share listed companies from 2007 to 2014 were used to test the relationship between the increase in enterprise equity investment and the acquisition of land resources and overinvestment. The descriptive statistics, correlation analysis and least squares linear regression were used to solve the above question.

Findings

One of the reasons for the enterprise equity increase is to obtain scarce land resources. The enterprise acquisition for land resources leads to overinvestment. The equity investment increase from obtaining land resources will further stimulate enterprise group to overinvest.

Research limitations/implications

The authors could not get the actual data of land that subsidiaries have obtained directly. In this research, the authors get the data using consolidated statements and subsidiary statements indirectly.

Practical implications

The results make contributions to the influencing factors and economic consequence of the enterprise investment structural deviation.

Social implications

It provides reference to optimize the “interaction” relationship between government and enterprises.

Originality/value

It identified the “dual-channel” conduction mechanism between land resource acquisition and enterprise overinvestment.

Citation

Yang, J., Liu, B. and Yuan, L. (2017), "Land and resources acquisition, equity investment increase and enterprise overinvestment", Nankai Business Review International, Vol. 8 No. 1, pp. 57-79. https://doi.org/10.1108/NBRI-10-2016-0036