Ding, S. , Guariglia, A., Knight, J. and Yang, J. (2021) Negative investment in China: financing constraints and restructuring versus growth. Economic Development and Cultural Change, 69(4), pp. 1411-1449. (doi: 10.1086/706825)
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Abstract
This paper addresses an interesting phenomenon in China’s investment pattern: despite high aggregate investment and remarkable economic growth, negative investment is commonly found at the microeconomic level. Using a large firm-level dataset, mainly made up of unlisted companies, we show that private firms undertake negative investment in order to raise capital. We also find that, owing to over-investment and mis-investment in the past, state-owned firms have had to restructure by getting rid of obsolete capital in the face of increasing competition and hardening budget constraints. Finally, rapid economic growth counterweighs both effects for all types of firms, with a larger impact in the private and foreign sectors. Thus, the needs to redeploy resources and to overcome capital market imperfections help to explain the negative investment of many Chinese firms.
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: | Guariglia, Professor Alessandra and Ding, Professor Sai |
Authors: | Ding, S., Guariglia, A., Knight, J., and Yang, J. |
College/School: | College of Social Sciences > Adam Smith Business School > Economics |
Journal Name: | Economic Development and Cultural Change |
Publisher: | University of Chicago Press |
ISSN: | 0013-0079 |
ISSN (Online): | 1539-2988 |
Published Online: | 11 October 2019 |
Copyright Holders: | Copyright © 2019 The University of Chicago |
First Published: | First published in Economic Development and Cultural Change 69(4): 1411-1449 |
Publisher Policy: | Reproduced in accordance with the publisher copyright policy |
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