Do Firms Care About Investment Opportunities? Evidence from China.

54 Pages Posted: 11 Jan 2017 Last revised: 5 Mar 2019

See all articles by Sai Ding

Sai Ding

University of Glasgow

Minjoo Kim

University of Liverpool - Accounting and Finance Division

Xiao Zhang

Nankai University - School of Finance

Date Written: January 6, 2018

Abstract

What drives a firm's investment decisions in China? While most literature focuses on the role of financial factors (such as cash flow), we explore this most important question in corporate finance from the perspective of economic fundamentals. Empirical results show that private firms cherish investment opportunities more in China. State-owned enterprises respond more to the investment opportunities from the supply side, but much less so to demand-side shocks. These findings provide interesting policy implications for China's on-going ownership and financial sector reforms.

Keywords: investment opportunities, fundamentals, ownership reform, China

JEL Classification: D92, E22, G31, O16

Suggested Citation

Ding, Sai and Kim, Minjoo and Zhang, Xiao, Do Firms Care About Investment Opportunities? Evidence from China. (January 6, 2018). Journal of Corporate Finance, Vol. 52, 2018. Available at SSRN: https://ssrn.com/abstract=2896076 or http://dx.doi.org/10.2139/ssrn.2896076

Sai Ding

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

Minjoo Kim (Contact Author)

University of Liverpool - Accounting and Finance Division ( email )

227 Grove
Management School
Liverpool, Liverpool L69 3BX
United Kingdom

HOME PAGE: http://https://www.liverpool.ac.uk/management/staff/minjoo-kim/

Xiao Zhang

Nankai University - School of Finance

38 Tongyan Road, Jinnan District
Tianjin, Tianjin 300350
China

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