Ding, S. , Knight, J. and Zhang, X. (2019) Does China overinvest? Evidence from a panel of Chinese firms. European Journal of Finance, 25(6), pp. 489-507. (doi: 10.1080/1351847X.2016.1211546)
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Abstract
This paper uses a dataset of more than 100,000 firms over the period of 2000–2007 to assess whether and why Chinese firms overinvest. We find that corporate investment is more efficient in the non-state sector. Within all ownership categories, we uncover evidence indicating a degree of overinvestment among firms that invest more than their industry median or more than their predicted optimal investment. The free cash flow hypothesis provides a good explanation for China’s overinvestment in the non-state sectors, whereas in the state sector, overinvestment is attributable to the poor screening and monitoring of enterprises by banks.
Item Type: | Articles |
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Additional Information: | The authors thank the ESRC for providing financial support for this research (RES-000-22-3140). |
Status: | Published |
Refereed: | Yes |
Glasgow Author(s) Enlighten ID: | Ding, Professor Sai |
Authors: | Ding, S., Knight, J., and Zhang, X. |
College/School: | College of Social Sciences > Adam Smith Business School > Economics |
Journal Name: | European Journal of Finance |
Publisher: | Taylor & Francis |
ISSN: | 1351-847X |
ISSN (Online): | 1466-4364 |
Published Online: | 03 August 2016 |
Copyright Holders: | Copyright © 2016 The Authors |
First Published: | First published in European Journal of Finance 25(6): 489-507 |
Publisher Policy: | Reproduced in accordance with the copyright policy of the publisher |
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