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How to explain corporate investment heterogeneity in China's new normal: Structural models with state-owned property rights

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  • Shi, Jinchuan
  • Zhang, Xiaoqian

Abstract

This paper studies corporate investment and its structural change by the view of state-owned property right. By constructing dynamic investment decision-making model, we find corporate investment heterogeneity in China due to their different dynamic shifts of objective functions, demonstrated by our simulations. Empirical tests imply that the expansion of investment improves financial performance, but does not play a positive role on solving social employment. POEs expanded investment much more than SOEs did, even in the transitional period, but both of them reduced their investment significantly in new normal. Mechanisms are explored by 3-stage structural models for non-matched control group and nearest neighbor PSM matched control group. Although investment inefficiency of SOEs are concerned, executive stock ownership and equity finance could be exotic methods to stimulate efficient investment. Investment efficiency of POEs has been recovered in new normal but POEs have shifted away from ‘profit-driving’ they used to be in the old normal.

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  • Shi, Jinchuan & Zhang, Xiaoqian, 2018. "How to explain corporate investment heterogeneity in China's new normal: Structural models with state-owned property rights," China Economic Review, Elsevier, vol. 50(C), pages 1-16.
    • Handle: RePEc:eee:chieco:v:50:y:2018:i:c:p:1-16
    DOI: 10.1016/j.chieco.2017.10.005
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    More about this item

    Keywords

    State-owned property rights; Financial crisis; Investment;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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