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Does central bank independence matter for the location choices of Chinese firms’ foreign investments?

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  • Zhao, Yanping
  • Chen, Qing
  • de Haan, Jakob

Abstract

Based on the eclectic paradigm and institutional theory, we hypothesize that Chinese firms prefer to invest in host countries having a central bank with a level of independence that is comparable to that of the Chinese central bank. Using data of Chinese listed firms from 1999 to 2013, our logit models suggests that all components of central bank independence, namely personnel, policy and financial independence, and priority for price stability, have a significant negative impact on the foreign investment location choices of Chinese firms. The impact of central bank independence on location choices is bigger for non-state-owned enterprises than for state-owned enterprises. The investment location choices of non-state-owned enterprises are negatively associated with the distance between central bank independence in China and that in host countries, while for state-owned enterprises this distance has no effect.

Suggested Citation

  • Zhao, Yanping & Chen, Qing & de Haan, Jakob, 2023. "Does central bank independence matter for the location choices of Chinese firms’ foreign investments?," International Business Review, Elsevier, vol. 32(4).
    • Handle: RePEc:eee:iburev:v:32:y:2023:i:4:s0969593122001202
    DOI: 10.1016/j.ibusrev.2022.102092
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    More about this item

    Keywords

    China; Outward foreign direct investment; Location choices; Central bank independence;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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