Keke Tang
ABSTRACT
This article uses data from CSMAR database of Chinese A-share listed companies from 2003 to 2014 to study the relationship between market power and corporate investment under different economic cycle conditions. The empirical results show that companies with strong market power tend to invest more, while companies with weak market tend to invest less. Then cross terms are introduced to test the impact of business cycle and market power on corporate investment. We find that at different stages of the business cycle, companies with different market power have different investment behaviors: when the economy expands, the positive effect of market power on corporate investment will increase; when the economy is in recession, the positive effect of market power on corporate investment will diminish. The test results of the mediation effect model show that market power will influence corporate investment through financing and profitable intermediary channels, and this effect is not affected by economic fluctuations. Our conclusions hold after testing for robustness, endogenousness, and heterogeneity. This article studies the relationship between market power and corporate investment from the perspective of the business cycle, and provides new theoretical basis for related research at the company level and the macroeconomic level.
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