The dark side of investor interactive platforms: Evidence from corporate investment efficiency

•We investigate the impact of investor interactive platforms (IIPs) on corporate investment efficiency.•We observe that IIPs unintendedly reduce investment efficiency, reflected in over- and under-investment.•The effect is more pronounced for firms with weak monitoring intensity and high financing constraints.•Our findings unveil the dark side of IIPs, whereby managers may exploit them for information manipulation. This research investigates the impact of investor interactive platforms (IIPs), a novel firm-investor communication channel in China, on corporate investment efficiency. While IIPs are designed to bridge the informational asymmetry between firms and investors through online question-and-answer interaction, we observe that IIPs unintendedly reduce investment efficiency, reflected in over- and under-investment. We further employ multiple fixed effects and difference-in-differences analyses to strengthen the causality of our results. Cross-sectionally, the documented effect is more pronounced for firms with weak monitoring intensity and high financing constraints. Overall, our findings unveil the dark side of IIPs, whereby managers may exploit them for information manipulation, thereby exacerbating moral hazard and adverse selection, which ultimately undermine investment efficiency.