A Fire Sale without Fire: An Explanation of Labor- Intensive FDI in China

是 否 +2 论坛币

k人 参与回答

经管之家送您一份

应届毕业生专属福利!

求职就业群

赵安豆老师微信：zhaoandou666

经管之家联合CDA

送您一个全额奖学金名额~ !

立即领取

感谢您参与论坛问题回答

经管之家送您两个论坛币！

+2 论坛币

China’s labor-intensive industries are characterized by low technology and high competi- tion. The massive inflow of FDI in China’s labor intensive industries is inconsistent with the conventional wisdom that FDI should be more prevalent in technology-intensive and low competition industries. To explain this puzzle, we offer a “fire sale”hypothesis: fac- ing severe financial constraints, Chinese private firms give up their equity to form joint ventures with foreign firms in order to obtain financing. Using the garment industry as an example, we find that among domestic firms, the financial constraint index is highest for private firms and lowest for state-owned firms. We further estimate a probit model of joint-venture decisions by private firms. Our results suggest that those private firms with greater financial constraints are more likely to seek foreign joint ownership. The effect of financial constraints on joint venture decision is both statistically and economically signif- icant.

扫码加我 拉你入群

请注明：姓名-公司-职位

以便审核进群资格，未注明则拒绝

分享0 收藏0 回帖

关键词：Explanation intensive without Nation withou without China

Using a large firm-level panel dataset from the Chinese National Bureau of Statistics, we examine
the effect of financial distortions on FDI inflows in China’s labor-intensive industries. Following
Whited and Wu (2006), we estimate the investment Euler equation and construct a financing
constraint index for each firm. We find that among domestic firms, the financing constraint index
is highest for private firms and lowest for state-owned firms. This finding is consistent with the
political pecking order hypothesis that states that there is a severe lending bias in China’s
financial system against private firms in favor of state-owned enterprises. Then we estimate a
probit model of joint-venture decisions by private firms. We show that firms with greater
financing constraints are more likely to be acquired and controlled by foreign firms. We interpret
this evidence to be consistent with the fire-sale hypothesis that states that private firms relinquish
their equity and control to foreign investors in order to raise financing for growth. We find that
those firms in the top 25 percent of the most financing constraints could have avoided losing 31.5
percent of the equity share to foreigners had they faced the same favorable financing constraints
as a typical firm in Zhejiang Province.