The Check-and-Balance Affect on the Relationship between Financing Constraints and Investment Efficiency －Taking the Chinese Software and IT Industry as a Sample

Abstract

This study explores the relationship between the degree of financing constraints and investment efficiency based on the moderator of the checks-and-balances mechanism using the Ordinary Least Square method and Quantile regressions for software and IT service sample industries of the Chinese listed companies from 2017 to 2021. The study finds that for software and IT service industries, the higher the degree of financing constraints, the worse the investment efficiency. Overall, the higher the degree of financing constraints, the greater the separation of powers between the chairman and the managing director, and the greater the checks and balances that can be exercised, resulting in a significant increase in investment efficiency. This is especially true in the very high and very low levels of investment efficiency. However, at any level of investment efficiency, the degree of independent directorship does not have a significant counterbalancing effect between financing constraints and investment efficiency and is even reversed at the average level of overall efficiency. Based on the above findings, this study also proposes corresponding recommendations.