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Outward FDI and stock price crash risk---Evidence from China

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  • Liu, Haiyue
  • Wang, Yile
  • Huang, Ling
  • Zhang, Xueyong

Abstract

This paper examines the impact of Chinese outward foreign direct investment (OFDI) on stock price crash risk, based on 6273 OFDI events completed by 1541 A-share listed companies in 128 host countries from 2000 to 2018. Using a propensity matching score (PSM) method and difference in differences (DID) estimation, we find that OFDI reduces the stock price crash risk of the investing company, and the effect is more pronounced in host countries that own better institutional environments. The mechanism analyses find that the impact of OFDI on stock price crash risk is more significant when the companies invest in areas where business is more convenient, the protection of minority investors is greater, and information disclosure is more complete.

Suggested Citation

  • Liu, Haiyue & Wang, Yile & Huang, Ling & Zhang, Xueyong, 2021. "Outward FDI and stock price crash risk---Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:intfin:v:73:y:2021:i:c:s1042443121000858
    DOI: 10.1016/j.intfin.2021.101366
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    More about this item

    Keywords

    OFDI; Stock price crash risk; Information disclosure; Institutional quality; PSM-DID;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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