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Regional Disparities And Investment-Cash Flow Sensitivity: Evidence From Chinese Listed Firms

  • Jianjun Sun
  • Nobuyoshi Yamori

In China, regional disparities are significant. We find that firms in inland regions rely more on their internal funds in terms of their investment activities than those in coastal regions, and that the sensitivity gap between inland and coastal firms widened in the recent contractionary monetary policy period. This suggests that firms in inland regions find it harder to obtain outside funds due to the unfavourable social and economic environments they face. Our findings suggest that capital markets in China respond rationally to the potential impact of regional disparities on a firm's performance. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Asia Pty Ltd

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Article provided by Wiley Blackwell in its journal Pacific Economic Review.

Volume (Year): 14 (2009)
Issue (Month): 5 (December)
Pages: 657-667

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Handle: RePEc:bla:pacecr:v:14:y:2009:i:5:p:657-667
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  1. Sean Cleary & Paul Povel & Michael Raith, 2003. "The U-shaped Investment Curve: Theory and Evidence," Finance 0311010, EconWPA.
  2. Kaplan, Steven N & Zingales, Luigi, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 169-215, February.
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  8. Aydogan Alti, 2003. "How Sensitive Is Investment to Cash Flow When Financing Is Frictionless?," Journal of Finance, American Finance Association, vol. 58(2), pages 707-722, 04.
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