Can local financial regulation improve corporate investment efficiency? Evidence from China

Purpose This study aims to delve deeply into the relationship between financial regulation and corporate investment efficiency in the context of emerging markets. Design/methodology/approach Based on the data of listed companies in China’s A-share market, the study explores the impact of local financial regulation on corporate investment efficiency. Findings It finds that enhancing local financial regulation contributes to improving investment efficiency. Such regulation can enhance information transparency, optimize resource allocation and foster a more equitable and inclusive financing environment, thereby exerting a governance effect on investment efficiency. Besides, in regions with more developed and complex financial markets, strengthened local financial regulation yields more effective governance outcomes for enterprises. Finally, a higher level of FinTech application and the digital capabilities of enterprises facilitate the full realization of the positive effects of local financial regulation. Originality/value This study provides a deeper insight into theories about the efficiency of financial supervision and the latest empirical evidence from emerging markets on the external governance of corporate investment efficiency.