재무연구 제 권 호 (2015년 5월)
Asian Review of Financial Research, Vol., No..
pp.433~433
pp.433~433
Product market competition and corporate investment : Evidence from China
Fuxiu Jiang School of Business Renmin University of China 59 Zhongguancun Street, Haidian District Beijing, China
Bing Zhu School of Business Renmin University of China 59 Zhongguancun Street, Haidian District Beijing, China
Kenneth A. Kim School of Management State University of New York at Buffalo Buffalo, New York 14260
Suk H. Kim College of Business Administration University of Detroit Mercy 4001 W. McNichols Road Detroit, MI 48221
In contrast to recent studies using U.S. data, we find a positive relation between product market competition and corporate investment using a sample of Chinese manufacturing firms during 1999-2010. A quasi-natural experiment and change regressions yield consistent evidence. We contend that China’s high growth rate, as it transitions from a developing economy to a developed economy, is what drives the positive relation between competition and investment. We directly test and provide support for this growth-oriented explanation. We also find that high investment under high competition is a value-enhancing proposition for firms. Finally, we also test to see if there are some firm-types that are more likely to invest under high competition in a growing economy, and we find that firms with high predation risk, firms that are industry leaders, and firms with good governance are the ones that invest more.
Fuxiu Jiang
Bing Zhu
Kenneth A. Kim
Suk H. Kim
In contrast to recent studies using U.S. data, we find a positive relation between product market competition and corporate investment using a sample of Chinese manufacturing firms during 1999-2010. A quasi-natural experiment and change regressions yield consistent evidence. We contend that China’s high growth rate, as it transitions from a developing economy to a developed economy, is what drives the positive relation between competition and investment. We directly test and provide support for this growth-oriented explanation. We also find that high investment under high competition is a value-enhancing proposition for firms. Finally, we also test to see if there are some firm-types that are more likely to invest under high competition in a growing economy, and we find that firms with high predation risk, firms that are industry leaders, and firms with good governance are the ones that invest more.
