Trade-induced Competition and Ownership Dynamics

42 Pages Posted: 27 Nov 2018 Last revised: 15 Jan 2019

See all articles by Qing Hu

Qing Hu

The University of Hong Kong - Faculty of Business and Economics

Wenjing Li

Jinan University, School of Management

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Lai Wei

Lingnan University - Department of Finance and Insurance

Date Written: December 11, 2018

Abstract

This paper documents a causal effect of trade-induced competition on the ownership dynamics of firms using the largest trade liberalization in China. By exploiting varying degrees of tariff reductions across industries, we find that firms that are more affected by competitive shock experience a larger relative increase in their foreign shareholdings compared to those less affected. We also find a stronger relative effect among firms with a greater demand for external financing and technology, which indicates the strategic role of foreign shareholdings in empowering domestic firms to obtain financing and new technologies in a competitive market.

Keywords: Trade Liberalization, Competition, Ownership Dynamics

JEL Classification: F10, F14, G32

Suggested Citation

Hu, Qing and Li, Wenjing and Lin, Chen and Wei, Lai, Trade-induced Competition and Ownership Dynamics (December 11, 2018). Available at SSRN: https://ssrn.com/abstract=3278087 or http://dx.doi.org/10.2139/ssrn.3278087

Qing Hu (Contact Author)

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

Hong Kong

Wenjing Li

Jinan University, School of Management ( email )

No. 601, West Huangpu Road
Guangzhou, Guangdong 510632
China

Chen Lin

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

Pokfulam Road
Hong Kong
China

Lai Wei

Lingnan University - Department of Finance and Insurance ( email )

8 Castle Peak Road
Lingnan University
Hong Kong, New Territories
China

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