A leap of faith that echoes well? The value impact of Chinese firms starting up business overseas

Baizhou Lu, Wei Hao, Jing Liao and Udomsak Wongchoti

Global Finance Journal, 2023, vol. 57, issue C

Abstract: We investigate the impact of greenfield outward foreign direct investment (GODI) by Chinese firms on their subsequent Tobin's Q. Our findings indicate that Chinese listed companies from 2003 to 2019 generally experience a significantly positive boost in perceived firm value (or growth prospects) when engaging in overseas business start-ups (i.e., with no foreign partners) when compared to their inactive peers. The positive GODI effect is more prominent among privately owned enterprises vs. state-owned enterprises (SOEs). Our mechanism tests indicate that lowered effective tax rates and reduced illiquidity due to conducting greenfield ODI serve as the value-enhancing channels. Possibly driven by political objectives, SOEs tend to prioritize developing and Belt-Road countries as the destination for their greenfield overseas endeavors.

Keywords: Greenfield ODI; Firm performance; State ownership; China (search for similar items in EconPapers)
JEL-codes: G18 G30 G32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:57:y:2023:i:c:s1044028323000650

DOI: 10.1016/j.gfj.2023.100870

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