Can Enterprises Invest Efficiently in Smart Cities?

ABSTRACT

The rapid expansion of the digital economy has accelerated smart city (SC) development in China. Using a time‐varying difference‐in‐differences approach, we examine the impact of SC policies on corporate investment efficiency. We document that SC construction significantly enhances investment efficiency, with robust results across multiple tests. Mechanism analyses indicate that the effect operates through reduced information asymmetry and mitigated managerial overconfidence. The impact is stronger among non‐Big Four firms, those with weaker internal controls, growth‐stage firms, high‐tech enterprises, and firms located in regions with low levels of marketization.