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Words vs. actions: International variation in the propensity to fulfil investment pledges in China

Listed author(s):
  • Abigail S. Hornstein

    ()

    (Department of Economics, Wesleyan University)

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    We examine whether companies from certain countries are more likely to fulfil investment pledges. Using data on contracted and utilized FDI in China, we find that firms fulfil an average of 59% of their pledges within two years. The propensity to fulfil pledges is lower for firms from countries with greater uncertainty avoidance, power distance, and egalitarianism; higher if the source country is more traditional; and is unaffected by popular attitudes towards China. Prior literature has found that these cultural characteristics are associated with higher levels of utilized FDI. We extend this to show that announcements of planned corporate activity may be more reliable for firms from countries with certain cultures.

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    File URL: http://dx.doi.org/10.1016/j.chieco.2017.07.014
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    Paper provided by Wesleyan University, Department of Economics in its series Wesleyan Economics Working Papers with number 2017-005.

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    Length: 24 pages
    Date of creation: Jul 2017
    Publication status: Published China Economic Review 45 (2017) 195–218
    Handle: RePEc:wes:weswpa:2017-005
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