Do firms’ pension contributions decrease their investment efficiency in Chinese context?
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 relation...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
AOSIS
2023-03-01
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| Series: | South African Journal of Business Management |
| Subjects: | |
| Online Access: | https://sajbm.org/index.php/sajbm/article/view/3449 |
| Summary: | 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. |
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| ISSN: | 2078-5585 2078-5976 |