Trade-induced competition and ownership dynamics

Qing Hu, Wenjing Li, Chen Lin and Lai Wei

Journal of Development Economics, 2023, vol. 160, issue C

Abstract: This paper documents a causal effect of trade-induced competition on firms’ ownership dynamics using the largest trade liberalization China has experienced, its accession to the World Trade Organization. By exploiting varying degrees of tariff reductions across industries, we find that firms that are more affected by competitive shocks experience a larger relative increase in their foreign ownership compared with those less affected. In addition, we find a stronger (weaker) effect for firms with a greater (lesser) demand for external financing and technology, which indicates the strategic role of foreign shareholders in empowering domestic firms to obtain financing and new technologies in a competitive market.

Keywords: Trade liberalization; Competition; Ownership dynamics (search for similar items in EconPapers)
JEL-codes: F10 F14 G32 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:160:y:2023:i:c:s0304387822001213

DOI: 10.1016/j.jdeveco.2022.102979

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