Confucianism, openness to the West, and corporate investment efficiency

This study presents robust findings that Confucianism significantly improves investment efficiency of Chinese listed firms and that the improvement is achieved through decreasing overinvestment without inducing underinvestment. Financial reporting quality is found to be an important mechanism for the disciplinary effect of Confucianism to work. More importantly, we provide strong and consistent evidence that openness to the West neutralizes the role of the Confucianism in overinvestment. Against the backdrop of globalization, this paper offers valuable references to emerging markets that experience intensive interactions with developed economies.