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Financial development, ownership and internationalization of firms: evidence from China

Author

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  • Lishuai Lian
  • Chao Chen

Abstract

Purpose - The purpose of this paper is to examine the relationship between financial development and internationalization of Chinese firms, whether the above relationship could be varied for firms with different kinds of ownership, and the channels through which financial development affects internationalization. Design/methodology/approach - This paper uses a sample of 2,053 firms for the period 2001 to 2013, and applies the methods of ordered logit, logit, and OLS regressions to examine the role of financial development on firms’ internationalization. Findings - The results show that financial development accelerates the level of international process of Chinese firms, and this effect is stronger for the non-state-owned enterprises (NSOEs) than for SOEs. The authors also document that financial development increases the investment scale of outward foreign direct investment (OFDI). In addition, the evidence on the channels through which financial development affects internationalization indicates that financial development accelerates the level of international process in high-technology industries and industries that are more dependent on external financing, and promotes the technology-seeking OFDI, and these effects are more prominent for NSOEs than for SOEs. Originality/value - First, this study examines Chinese firms’ internationalization from the perspective of financial development and focuses on the relationship between financial development and internationalization, and varies this relationship over firms with different kinds of ownership. Second, this study adds to the existing literature by identifying two channels through which financial development has an impact on internationalization, namely, external finance and high-tech intensiveness, and identifies the impact of financial development on technology-seeking OFDI.

Suggested Citation

  • Lishuai Lian & Chao Chen, 2017. "Financial development, ownership and internationalization of firms: evidence from China," China Finance Review International, Emerald Group Publishing Limited, vol. 7(3), pages 343-369, August.
    • Handle: RePEc:eme:cfripp:cfri-06-2016-0054
    DOI: 10.1108/CFRI-06-2016-0054
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    Citations

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    Cited by:

    1. Yao, Xingyuan & Tang, Xiaobo, 2021. "Does financial structure affect CO2 emissions? Evidence from G20 countries," Finance Research Letters, Elsevier, vol. 41(C).
    2. Feng, Yumei & Yao, Shouyu & Wang, Chunfeng & Liao, Jing & Cheng, Feiyang, 2022. "Diversification and financialization of non-financial corporations: Evidence from China," Emerging Markets Review, Elsevier, vol. 50(C).
    3. Chen, Bingzheng & Feng, Frank Y. & Powers, Michael R. & Qiu, Joseph, 2019. "Risk-revealing contracts for government-sponsored microinsurance," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    4. Eng, Li Li & Fang, Hanqing & Tian, Xi & Yu, T. Robert, 2021. "Path dependence and resource availability: Process of innovation activities in Chinese family and non-family firms," Emerging Markets Review, Elsevier, vol. 49(C).
    5. Guo, Lin & Platikanov, Stefan, 2019. "Institutional ownership and corporate governance of public companies in China," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).

    More about this item

    Keywords

    China; Internationalization; Financial development; Ownership; F23; G20; M16;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration

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