What Drives Fixed Asset Holding and Risk-Adjusted Performance of Corporate in China? An Empirical Analysis

This paper attempts to shed light on the over-investment debate by investigating listed firms in China. Firms with higher level of fixed asset holding, higher level of overhead expenses, and being covered by the tax-favor policy in China are found to be associated with a lower risk-adjusted performance. In addition, the tax-favor policy itself encourages fixed asset investment. In contrast to some of the previous literature, state-ownership of firms, dividend policy, and ownership concentration are not robust predictors of risk-adjusted performance, and debt level, managerial shareholding, and profit per unit of asset are not robust predictors of fixed asset investment.