Bilateral investment treaties and foreign direct investment: Evidence from emerging market firms

Bilateral investment treaties (BITs) help developing countries attract foreign direct investment (FDI) from developed countries. However, whether BITs matter for emerging market firms’ (EMFs) FDI is unclear. This paper investigates how BITs affect EMFs’ FDI locations using conditional logit models with firm-level panel data from 2003 to 2015. The results show that BITs can help host countries attract FDI from emerging market countries. BITs work alongside good institutions to increase the attractiveness of FDI, irrespective of a host country being developed or not.     

Accounting quality and information asymmetry of foreign direct investment firms

This study argues that the foreign direct investment firms mislead stakeholders and are associated with greater information asymmetry due to the raised agency problem. Results show that both earnings management and idiosyncratic volatility increase with foreign investment. Managerial ownership mitigates such inefficiency.     

Credit constraints and investment in human capital: Training evidence from transition economies

Using a unique survey database of 8265 firms from 25 transition economies, I find that lack of access to finance in general, and to bank credit in particular, is associated with significantly lower investment in on-the-job training. This effect is stronger in education-intensive industries and in industries facing good global growth opportunities. To address endogeneity issues, I use the structure of local credit markets as an instrument for credit constraints at the firm-level. In addition, in panel estimates, I control for the presence of unobserved firm-level heterogeneity, as well as for changes in macroeconomic conditions.     

Sectoral linkages of foreign direct investment firms to the Czech economy

Foreign direct investments (FDI) influence the industrial structure of the host economy through linkages to the domestic economy. Firms may use intermediate goods produced by either domestic or foreign firms, and sell their products to either domestic or foreign customers. The resulting change in the industrial structure of the indigenous economy is analysed in a panel regression for the case of the Czech Republic. The results show that linkages have a strong influence on the sectoral composition of the indigenous economy, supporting the development of indigenous manufacturing and labour-intensive industry.     

IFRS adoption in China and foreign institutional investments

We examine the effectiveness of China’s IFRS adoption from the perspective of an important set of financial report users, foreign institutional investors. We find that foreign institutional investment does not increase after China’s IFRS adoption, and some evidence that it actually declines, particularly among firms with weaker incentives to credibly implement IFRS, or with greater ability to manipulate IFRS’s fair value provisions. We also find that the association between earnings and returns generally declines after IFRS adoption, consistent with reduced earnings quality. In addition, we find that foreign institutional investors’ returns decrease after China’s IFRS adoption. Finally, the decline in foreign institutional investment is greater among investors from countries with weak institutions that have also adopted IFRS. Taken together, our evidence suggests that the weak institutional infrastructure in China’s transitional economy impairs IFRS’s intended goal of attracting institutional investment through improved financial reporting quality. Further, financial information users’ home country institutions and IFRS adoption experience affect the effectiveness of IFRS adoption.     

State-ownership and financial constraints on investment of Chinese-listed firms: new evidence

We examine how state-ownership affects financial constraints on investment of Chinese-listed firms during 1999–2008. We find that although an average sample firm experiences some degree of financial constraints, state-ownership does not necessarily help in reducing the firm's financial constraints on investment. Further evidence shows that state-ownership does not lead to more borrowing from the Chinese banking sector, implying that state-ownership does not necessarily reduce the firm's financial constraints via the state-controlled banking sector. We consider not only the standard factors in the investment equation, but also the firm's equity financing behaviour explicitly. The result is robust to both the conventional proxy for financial constraints, i.e. the investment–cash-flow sensitivity, and a recently developed proxy for financial constraints, i.e. the KZ index. Our results suggest that China's corporatisation movement is effective in that soft budget constraints once enjoyed by former state-owned enterprises have been removed along with the progress of corporatisation. These firms, although still state-involved, can be seen as modern corporations operating in a market environment.     

Social trust and foreign ownership: Evidence from qualified foreign institutional investors in China

We investigate the effects of social trust on foreign institutional investors’ equity holdings in listed Chinese firms from 2005 to 2011. We find that social trust embedded in the regional environment is an important factor for the investment decisions of foreign institutional investors. We also find that the proportion and likelihood of foreign ownership increases with the level of social trust. The results support the notion that social trust and trust-related information help mitigate informational barriers in international equity investments. Our results are robust to alternative measures of social trust and a range of model specifications, including instrumental variable estimation. We document that the effects of social trust on foreign ownership diminishes in the presence of organizational learning, better formal institutional development, conservative financial reporting, and asset transparency. We also show that foreign institutional investors from countries with a common law origin are more likely to incorporate trust-related information in their investment decisions.     

Volatility and growth: Credit constraints and the composition of investment

How does uncertainty and credit constraints affect the cyclical composition of investment and thereby volatility and growth? This paper addresses this question within a model where firms engage in two types of investment: a short-term one; and a long-term one, which contributes more to productivity growth. Because it takes longer to complete, long-term investment has a relatively less cyclical return; but it also has a higher liquidity risk. The first effect ensures that the share of long-term investment to total investment is countercyclical when financial markets are perfect; the second implies that this share may turn procyclical when firms face tight credit constraints. A novel propagation mechanism thus emerges: through its effect on the cyclical composition of investment, tighter credit can lead to both higher volatility and lower mean growth. Evidence from a panel of countries provides support for the model's key predictions.     

我国对外贸易的FDI与国内银行信贷促进效应的比较分析

关于对外贸易与FDI之间关系的研究有很多,但对于FDI与国内金融部门特别是国内银行信贷在对外贸易的不同影响这个问题上却很少有人作出比较,而本文就是以这个作为研究主题,尝试解决以下几个问题:改革开放以来我国FDI流入与国内银行信贷对对外贸易的作用有何不同?在不同时期内,两者又具有怎么样的不同关系?等等.     

Inter-industry FDI spillovers from foreign banks: Evidence in transition economies

Using a sample of nonfinancial domestic firms in transition economies from Eastern Europe and Central Asia, we examine whether and how inter-industry spillover from foreign direct investment in the banking sector occurs. Our findings show that the innovation pursued by domestic firms benefits from foreign bank penetration. However, these positive inter-industry spillovers surprisingly do not seem to work through enhanced credit access. We further find these positive spillovers to occur mainly for foreign banks that use relationship lending, domestic firms that do not export, and host countries that are less open to the global market.     

Technology centrality,bilateral knowledge spillovers and mergers and acquisitions

We construct a search and matching model, which features heterogeneous firms with different management skills and industry-specific knowledge capital, to study individual firms’ behavior in the M&A market. Two firms form a merger if the bilateral knowledge spillovers between them result in a productivity gain, generating a merger surplus larger than the transaction cost. Three key predictions are produced from the model: (i) acquirers with higher technology centrality and management skill exert higher search intensities; (ii) targets with higher technology centrality and lower management skill exert higher search intensities; and (iii) acquirer–target firm pairs with larger bilateral knowledge spillovers generate larger surplus and are more likely to consummate a merger deal. We find strong empirical support for these predictions from merger deals in the U.S. between 1984 and 2020.     

Convergence of accounting standards and foreign direct investment

Since the development of the eclectic paradigm by Dunning (1977, 1988, 1993), many studies have investigated different forms of location advantages that attract foreign direct investment (FDI). In this study, we consider accounting standards as a component of the institutional infrastructure of a location and hypothesize that the convergence of domestic and International Financial Reporting Standards (IFRS) promotes FDI as it reduces information processing costs for foreign investors.² We also hypothesize that the effect of reduced information costs is stronger for partner countries whose accounting systems showed greater pre-convergence differences because they magnify the facilitating role of accounting standard convergence for FDI. Using bilateral FDI data from 30 OECD countries between 2000 and 2005, we find evidence generally consistent with these hypotheses.     

Analysis of foreign investment impact on the dynamics of national capitalization structure: A computational intelligence approach

Central and Eastern Europe countries are in the political and economic transitional process of merging with the European Union. How has foreign investment already transformed these countries’ economic sectors and how will it affect the national economies in terms of capitalization across economic sectors in the near future? Our prime consideration is portfolio investment impact on the dynamics of respective countries’ capitalization structure in terms of sectorial investment distribution. The proposed method rests on the artificial intelligence approach (neural network method), which is targeted to grasp non-linear dynamics of heterogeneous foreign investment impact on national capitalization structure.     

Religious freedom, religious diversity, and Japanese foreign direct investment

Research into the links between religion and foreign direct investment is scarce, partly because research on religion has not been the traditional domain of business and economics. Nevertheless, religion affects the economies, political structures, legal environments, and social behaviors of people around the world and is, therefore, an important element of the international business environments. Foreign direct investment (FDI) decisions are often made after an assessment of the international business environments. This article makes a singular contribution by focusing on the impact of religion – religious freedom and religious diversity – on the foreign direct investment of Japanese companies. We find that national income and religious diversity significantly influence Japanese decisions to invest.     

On the role of foreign directors: Evidence from cross-listed firms

We examine the determinants of appointment of U.S. independent directors (USIDs), and their impact and effectiveness, on the boards of cross-listed foreign firms versus non-cross-listed firms. For non-cross-listed firms, significant determinants of USID presence include factors related to both advising and monitoring roles, whereas for cross-listed firms, appointment of USIDs are related to monitoring factors. We find that USIDs have a significantly positive impact on cross-listed firms’ value, especially for firms from countries that are culturally and institutionally different from U.S. and countries with weak investor protection. The positive value effect is strongest for firms in which USIDs serve on governance committees. We also find that cross-listed firms with UISDs are better at acquiring both domestic and cross-border targets and have higher CEO turnover sensitivity. For non-cross-listed firms, USIDs have negative or no impact on value.     

Conditional volatility persistence and volatility spillovers in the foreign exchange market

I investigate the magnitudes and determinants of volatility spillovers in the foreign exchange (FX) market, using realized measures of volatility and heterogeneous autoregressive (HAR) models. I confirm both meteor shower effects (i.e., inter-regional volatility spillovers) and heat wave effects (i.e., intra-regional volatility spillovers) in the FX market. Furthermore, I find that conditional volatility persistence is the dominant channel linking the changing market states of each region to future volatility and its spillovers. Market state variables contribute to more than half of the explanatory power in predicting conditional volatility persistence, with the model that calibrates volatility persistence and spillovers conditionally on market states performing statistically and economically better. The utilization of market state variables significantly extends our understanding of the economic mechanisms of volatility persistence and spillovers and sheds new light on econometric techniques for volatility modeling and forecasting.     

Credit risk and bond pricing of local government in China

The relationship between credit risk and the pricing of local government bonds in China is explored in this paper. The pricing of local government bonds was found to reflect credit risk, but the risk premium was small. The type of bond (‘directional’ or ‘non-directional’) significantly affected pricing. Repayment source had no effect. The authors make recommendations for the central government, local governments and investors.     

基于VECM模型的信贷约束、家庭债务与中国宏观经济波动分析

采用1997~2013年家庭债务、贷款价值比与 GDP 增长率等变量数据,在借鉴 Kim 的模型基础上,构建 VECM 模型,检验了信贷约束、家庭债务与中国宏观经济波动之间的关系。结果表明：短期内宽松的借贷约束促进了家庭债务的增加,从而推动经济增长,但从长期来看,宽松的借贷约束会导致家庭债务过高,阻碍长期经济增长;与居民消费率、家庭债务等变量相比,贷款价值比、利率对宏观经济波动的影响较大。因此,政府决策部门应制定合理的消费金融政策,居民应通过优化家庭资产组合,以实现家庭债务的可持续性增长,从而促进经济增长。     

征信机制、信用信息与信贷约束 ——基于中小企业板上市公司的实证

本文从理论上阐述了征信机制缓解信息不对称,降低企业融资成本,提高信贷可 获得性的作用机理,并以中小企业板上市公司为研究对象,实证检验了企业基本信息、财务信 息、商业信用信息等各类信用信息对中小企业信贷规模和融资成本的影响。实证研究发现：中 小企业基本信息对信贷可获得性的影响存在异质性,对信贷规模影响不显著。企业财务信息、 商业信用信息与贷款可获得性、贷款规模、融资成本支出显著正相关。