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Government Intervention and Firm Investment: Evidence from International Micro-Data

Journal of International Money and Finance, Vol. 32, No. 637-653, 2013

Posted: 31 Jan 2010 Last revised: 7 Feb 2014

See all articles by Chen Lin

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Sonia M. L. Wong

University of Hong Kong

Date Written: March 10, 2013

Abstract

Building on the important study by Beck, Demirguc-Kunt and Maksimovic (2005, Journal of Finance), we examine how government intervention in firms’ decision-making is related to their investment and sales growth. Using the unique World Bank dataset (WBES) covering 6,500 firms in 70 countries, we find strong evidence that the extent of government intervention in firms' investment, employment, sales, pricing, dividend, and merger and acquisition decisions is negatively related to their investment and sales growth, with the effect being more profound in foreign owned firms. The empirical results are robust to a series of robustness tests and instrumental variable regressions.

Keywords: Government Intervention, Ownership, Investment Growth

JEL Classification: G31, G32, G38

Suggested Citation

Lin, Chen and Wong, Sonia M. L., Government Intervention and Firm Investment: Evidence from International Micro-Data (March 10, 2013). Journal of International Money and Finance, Vol. 32, No. 637-653, 2013, Available at SSRN: https://ssrn.com/abstract=1454884 or http://dx.doi.org/10.2139/ssrn.1454884

Chen Lin (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Sonia M. L. Wong

University of Hong Kong ( email )

1021, KKL Building
Pokfulam Road
Hong Kong
China

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