The effect of superstitious beliefs on corporate investment efficiency: evidence from China

Belaynesh Teklay, Wei Yu, Keying Zhu

Research output: Journal PublicationArticlepeer-review


This study investigates the effect of CEOs' cultural-specific superstitious beliefs on corporate investment efficiency in China. Using data collected from Chinese listed firms from 2008-2021, we find that CEOs' beliefs about certain years in the zodiac year limit risk-taking behavior and thus mitigate overinvestment but aggravate underinvestment. Specifically, our findings reveal that superstitious beliefs of the zodiac impact corporate investment efficiency in two directions. For firms already in a state of overinvestment, CEOs' decision not to invest for fear of loss due to their superstitious belief of the zodiac year balances that firm's investment level, yielding a positive effect on corporate investment efficiency. However, in the case of firms that were already in a state of underinvestment, CEOs' risk-avert attitudes due to the same beliefs exacerbate underinvestment. Further, our findings show the effect of such beliefs are stronger in firms with a lower level of marketization, weaker internal control, and less external monitoring. Our findings shed light on the effect of Chinese traditional cultural factors on corporate decision making in emerging economies.
Original languageEnglish
Pages (from-to)1434-1447
Number of pages14
JournalInternational Review of Economics and Finance
Publication statusPublished - 2024


  • China
  • Investment efficiency
  • Superstitious belief
  • Zodiac year
  • Risk perception

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (all)


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