Government intervention and firm investment: Evidence from international micro-data |
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| Institution: | 1. CUHK Business School, Chinese University of Hong Kong, Hong Kong;2. Lingnan University, Hong Kong;1. School of Economics, Huazhong University of Science and Technology, Wuhan, 430074, China;2. School of Public Finance and Taxation, Southwestern University of Finance and Economics, Chengdu, 611130, China;1. Haas School of Business, University of California Berkeley, United States;2. Graduate School of Business, Stanford University, United States |
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| Abstract: | Building on the important study by Beck et al. (2005), we examine how government intervention in firms' decision-making is related to their investment and sales growth. Using the unique World Bank dataset (WBES) covering 6500 firms in 70 countries, we find strong evidence that the extent of government intervention in firms' investment, employment, sales, pricing, dividend, and merger and acquisition decisions is negatively related to their investment and sales growth, with the effect being more profound in foreign owned firms and less significant in state-owned firms. The empirical results are robust to a series of robustness tests and instrumental variable regressions. |
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