Financial development, ownership and internationalization of firms: evidence from China
Abstract
Purpose
The purpose of this paper is to examine the relationship between financial development and internationalization of Chinese firms, whether the above relationship could be varied for firms with different kinds of ownership, and the channels through which financial development affects internationalization.
Design/methodology/approach
This paper uses a sample of 2,053 firms for the period 2001 to 2013, and applies the methods of ordered logit, logit, and OLS regressions to examine the role of financial development on firms’ internationalization.
Findings
The results show that financial development accelerates the level of international process of Chinese firms, and this effect is stronger for the non-state-owned enterprises (NSOEs) than for SOEs. The authors also document that financial development increases the investment scale of outward foreign direct investment (OFDI). In addition, the evidence on the channels through which financial development affects internationalization indicates that financial development accelerates the level of international process in high-technology industries and industries that are more dependent on external financing, and promotes the technology-seeking OFDI, and these effects are more prominent for NSOEs than for SOEs.
Originality/value
First, this study examines Chinese firms’ internationalization from the perspective of financial development and focuses on the relationship between financial development and internationalization, and varies this relationship over firms with different kinds of ownership. Second, this study adds to the existing literature by identifying two channels through which financial development has an impact on internationalization, namely, external finance and high-tech intensiveness, and identifies the impact of financial development on technology-seeking OFDI.
Keywords
Acknowledgements
The authors would like to thank two anonymous referees, conference participants at the 2015 Macroeconomic Policies and the Impacts on the Behaviors of the Firm Symposium (Beijing), 2016 China International Conference in Finance (Xiamen), and seminar participants at Southwest University of Finance and Economics, Harbin Institute of Technology and Huazhong Institute of Technology, for valuable comments and suggestions. Chao Chen would like to acknowledge the support from the National Natural Science Foundation of China (NSFC No. 71472048).
Citation
Lian, L. and Chen, C. (2017), "Financial development, ownership and internationalization of firms: evidence from China", China Finance Review International, Vol. 7 No. 3, pp. 343-369. https://doi.org/10.1108/CFRI-06-2016-0054
Publisher
:Emerald Publishing Limited
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