Original Research

Do firms’ pension contributions decrease their investment efficiency in Chinese context?

Jin Wang, Deli Wang, Hai Long, Yu Chen
South African Journal of Business Management | Vol 54, No 1 | a3449 | DOI: https://doi.org/10.4102/sajbm.v54i1.3449 | © 2023 Jin Wang, Deli Wang, Hai Long, Yu Chen | This work is licensed under CC Attribution 4.0
Submitted: 12 June 2022 | Published: 24 March 2023

About the author(s)

Jin Wang, School of Finance and Economics, Guangdong Polytechnic Normal University, Guangzhou, China
Deli Wang, School of Accounting, Guangdong University of Foreign Studies, Guangzhou, China
Hai Long, International College, Krirk University, Bangkok, Thailand
Yu Chen, School of International Economics, Anhui International Studies University, Hefei, China


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.


pension contributions; Chinese pension policies; investment efficiency; Chinese listed firms; inefficient investment


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