The impact of leverage manipulation on investment efficiency in state-owned enterprises in the context of leverage regulation

With the aim of advancing sustainable development and enhancing the operational quality of state-owned enterprises (SOEs), this study investigates the impact of leverage manipulation on investment efficiency and its underlying mechanisms. Using annual data from A-share listed SOEs from 2014 to 2023 as the research sample, the analysis reveals that leverage manipulation has a detrimental effect on SOE investment efficiency. Mechanism tests further indicate that such manipulation impairs investment efficiency primarily by curtailing innovation expenditures. Moreover, the study finds that regulatory policies targeting leverage can effectively mitigate the adverse effects of leverage manipulation on investment efficiency. Heterogeneity analyses highlight that the negative impact of leverage manipulation is particularly pronounced among local SOEs, non-high-tech SOEs, and those burdened with excessive debt. Further analysis reveals that over-indebted SOEs are more prone to engage in over-investment following leverage manipulation, and it examines how the effect of leverage manipulation on SOE investment behavior changed before and after Covid-19. The insights from this research offer implications for the ongoing reform of SOEs and the promotion of sustainable economic growth.