When to go abroad: economic policy uncertainty and Chinese firms’ overseas investment |
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Authors: | Ji |
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Institution: | 1. School of Economics and Finance, Massey Business School, North Shore Mail Centre, Massey University – Albany Campus, Auckland, New Zealand;2. School of Business and Management, Shanghai International Studies University, Shanghai, China;3. School of Finance, Zhongnan University of Economics and Law, Wuhan, Hubei, China |
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Abstract: | We study how economic policy uncertainty (EPU) influences firms’ overseas investments for Chinese listed companies. We find a significant negative relationship between EPU and firms’ overseas investments after controlling for firm characteristics and macroeconomic variables. Chinese firms seem to reduce their overseas investments on fixed income securities when facing domestic policy uncertainty. The negative relationship is pronounced for financially constrained firms, firms relying on government subsidies and with low overseas revenues, and SOEs. Firms operating in high marketisation regions can mitigate the negative effect of EPU on firms’ overseas investments. Our results remain significant when considering endogeneity problems. |
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Keywords: | Economic policy uncertainty Overseas investment China |
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