Foreign Partners and Finance Constraints: The Case of Chinese Firms

20 Pages Posted: 31 May 2011

See all articles by Peter H. Egger

Peter H. Egger

Ifo Institute for Economic Research - International Trade and Foreign Direct Investment; Ludwig-Maximilians University of Munich; CESifo (Center for Economic Studies and Ifo Institute for Economic Research

Douglas Nelson

University of Nottingham - Leverhulme Centre for Research on Globalisation and Economic Policy (GEP)

Date Written: May 2011

Abstract

In this paper, we consider the extent to which financial constraints cause domestic firms to seek foreign partners. We employ a large firm‐level panel dataset for China which allows us to analyse this question empirically by looking at changes in foreign ownership status. We find a significant impact of several variables reflecting finance constraints. In particular, the results suggest that observed changes in debt‐to‐turnover ratios tend to be more important than other financial indicators to attract foreign capital. Moreover, foreign ownership relaxes finance constraints in turn and, already in the short run, tends to boost investment at the firm level.

Suggested Citation

Egger, Peter H. and Nelson, Douglas, Foreign Partners and Finance Constraints: The Case of Chinese Firms (May 2011). The World Economy, Vol. 34, Issue 5, pp. 687-706, 2011, Available at SSRN: https://ssrn.com/abstract=1854146 or http://dx.doi.org/10.1111/j.1467-9701.2011.01348.x

Peter H. Egger (Contact Author)

Ifo Institute for Economic Research - International Trade and Foreign Direct Investment ( email )

Poschingerstr. 5
Munich, DE-81679
Germany
+49 0 89 9224 1238 (Phone)
+49 0 89 985369 (Fax)

HOME PAGE: http://www.cesifo-group.de/portal/page?_pageid=36,425628&_dad=portal&_schema=PORTAL

Ludwig-Maximilians University of Munich

Schackstr. 4
Munich, 80539
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research

Poschinger Str. 5
Munich, DE-81679
Germany

Douglas Nelson

University of Nottingham - Leverhulme Centre for Research on Globalisation and Economic Policy (GEP) ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
292
PlumX Metrics