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Property Rights, Finance, and Reinvestment: Evidence from China's Private Enterprises

Author

Listed:
  • Chong-en Bai

    (Tsinghua University)

  • Julan Du

    (Chinese University of Hong Kong)

  • Julan Du

    (Chinese University of Hong Kong)

Abstract

The existing studies have failed to find conclusive results on the relative importance of property rights protection and access to external finance for enterprise reinvestment partly due to their lack of control for the endogeneity problems. In this study, using data of China's private enterprises, we re-investigate this issue by carefully addressing the endogeneity issues. We find that property rights protection is more important for the reinvestment decision than the access to external finance. Our study demonstrates forcefully that, China is no different from other transition economies regarding the fundamental importance of property rights security to firm performance.

Suggested Citation

  • Chong-en Bai & Julan Du & Julan Du, 2020. "Property Rights, Finance, and Reinvestment: Evidence from China's Private Enterprises," Annals of Economics and Finance, Society for AEF, vol. 21(2), pages 363-392, November.
    • Handle: RePEc:cuf:journl:y:2020:v:21:i:2:baidulutao
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    References listed on IDEAS

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    1. Figueroa, Camila & Iberti, Gonzalo & Riutort, Julio & Wagner, Rodrigo, 2023. "Do firms that state they are financially constrained tend to reinvest more of their profits?," International Review of Financial Analysis, Elsevier, vol. 90(C).

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    More about this item

    Keywords

    Property rights protection; Access to external finance; Reinvestment decision; China economy;
    All these keywords.

    JEL classification:

    • P14 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Property Rights
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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