Corporate investment during the financial crisis: Evidence from China

Hong Bo, Ciaran Driver and Hsiang-Chun Michael Lin

International Review of Financial Analysis, 2014, vol. 35, issue C, 1-12

Abstract: China's growth model suggests that the 2008 financial crisis may have affected the Chinese economy differently from what one observes in mature market economies. In this paper, we examine how Chinese corporate investment responded to the financial crisis by using 1689 listed nonfinancial firms during Q12006–Q32010. We document that (1) the overall impact of the financial crisis on Chinese corporate investment is negative; (2) among three channels conveying the effect of the financial crisis, namely, the demand channel, the financial constraints channel, and the uncertainty channel, the demand channel dominates; (3) financial assets held by a nonfinancial firm are important in explaining the firm's fixed investment behaviour; (4) as compared to non-state firms, state-controlled firms are less affected by the financial crisis and more active in engaging in financial assets investment; and (5) foreign ownership can be seen as a buffer against the negative effect of the financial crisis and foreign-involved Chinese firms are less active in financial assets investment as compared to domestic firms.

Keywords: Financial crisis; Fixed investment; Financial assets; Capital gains; State ownership; Foreign ownership; China (search for similar items in EconPapers)
JEL-codes: E2 G1 G3 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:35:y:2014:i:c:p:1-12

DOI: 10.1016/j.irfa.2014.07.002

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