How does market integration affect corporate investment? Evidence from China

Achieving the United Nations Sustainable Development Goals, particularly SDG 8 and SDG 9, requires a deeper understanding of how market structures shape corporate investment behavior. This study examines the relationship between market integration and corporate investment using a theoretical framework and panel data on non-financial A-share listed firms in China from 2008 to 2023. The results show that market integration expands investment scale but also intensifies inefficient investment, mainly through stronger competition, lower transaction costs, and larger market size. The effects are more pronounced in eastern regions and among non-state-owned enterprises, with internal investment more sensitive than external investment. Moreover, larger board size and higher ownership concentration mitigate the influence of market integration on firm investment. These findings highlight the role of market integration as a structural lever to promote sustainable and efficient investment in emerging economies.