Transportation Infrastructure and Corporate Power Decentralization: Empirical Evidence Based on High-speed Railway Timetables

Abstract

Abstract: Geographic location is the driving force behind spatial economic activities. Using the inter-city travel time shown in the National Railway Passenger Train Timetables in 2009—2016 to look into A-share listed firms, we investigate the impact of travel time reduction on the allocation of decision-making power within the corporate group and find that high-speed railway (HSR) promotes the flow of human resources and facilitates parent companies’ supervision of their subsidiaries’ agency behavior, thus reducing the information asymmetry and increasing the power decentralization. The empirical results show that the decrease of commuting costs significantly fosters corporate groups’ decision-making power decentralization. Controlling for the measuring errors that may result from flight availability, heterogeneity in cities’ growth, etc. and using the rail construction in 1962 as the instrumental variable, our results remain robust. For the mechanisms, we confirm that the HSR connection alleviates the information friction within a corporate group. Further, we find that HSR has a stronger effect of power decentralization on rapidly expanding and pure-play firms. The research asseses the non-monetary social benefits of China’s HSR, and provides an empirical reference for the optimal design of rights allocation and hierarchical structure.

Key words: corporate group, power decentralization, commuting costs

Li Jianan, Xiao Jinli, Wen Fenghua, Huang Xiaoping. Transportation Infrastructure and Corporate Power Decentralization: Empirical Evidence Based on High-speed Railway Timetables[J]. Management Review, 2024, 36(4): 3-14.

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