Beyond Boards and Contracts: Administrative Accountability and Investment Efficiency in State-Owned Enterprises

This study examines whether China’s Lifetime Accountability for Operations and Investments (LAOI) policy improves investment efficiency in state-owned enterprises (SOEs). Using a sample of 10,048 firm-year observations from Chinese A-share listed firms (2012–2022), the authors employ a staggered multi-period difference-in-differences (DID) design with 1:1 propensity score matching (PSM) to compare SOEs (treatment) and non-SOEs (control). Key outcomes include investment level, efficiency, underinvestment, and overinvestment, with the main explanatory variable being the interaction of SOE status and post-LAOI period.
The results show that LAOI significantly increases investment levels and efficiency—especially among underinvesting SOEs—without worsening overinvestment, suggesting it curbs agency problems rather than encouraging excessive risk-taking. Mechanisms include higher involuntary turnover of underperforming managers, reduced misconduct and tunneling, less managerial myopia, and better disclosure and governance. Effects are stronger in SOEs with executives near retirement, financial constraints, higher state ownership, local (vs. central) government control, or operations in monopolistic sectors. The policy also yields broader economic benefits, such as improved firm performance, lower transaction costs, higher employment, and reduced investment risk.
Data are drawn from CSMAR, Wind, DiBo, CEINET, and the China Statistical Yearbook. Users replicating or extending this work should account for staggered policy rollout and potential confounders (e.g., concurrent anti-corruption campaigns) by using robust DID estimators (e.g., CSDID or stacked DID). The dataset and variable definitions are well-suited for studying governance reforms in emerging markets or exploring SOE-specific accountability mechanisms.