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Financing constraints and ODI margins: Evidence from China

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  • Zhang, Fang
  • Yang, Lianxing

Abstract

Using a novel firm-level dataset on China, this paper examines the effects of financing constraints on enterprises’ outward direct investment (ODI) from the perspective of binary margins of ODI. The main findings of the paper are threefold. First, financing constraints show a negative effect on enterprises’ ODI for both the intensive and extensive margins, with a more significant effect on the extensive margin. Second, the negative effect is mostly significant in the energy industry, while it is not significant in non-energy industries. Finally, financing constraints show a negative effect on state-owned enterprises for both margins, while the effect is less significant for non-state-owned enterprises. The findings in the paper have policy implications for understanding and promoting ODI in emerging economies.

Suggested Citation

  • Zhang, Fang & Yang, Lianxing, 2020. "Financing constraints and ODI margins: Evidence from China," Economic Systems, Elsevier, vol. 44(1).
    • Handle: RePEc:eee:ecosys:v:44:y:2020:i:1:s0939362518303923
    DOI: 10.1016/j.ecosys.2019.100741
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    More about this item

    Keywords

    Financing constraints; Outward direct investment (ODI); Intensive margin; Extensive margin; Energy industry; State-owned enterprises (SOEs);
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment

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