Trade-induced Competition and Ownership Dynamics

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: 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