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How do government subsidies affect OFDI of private enterprises? Evidence from China

Author

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  • Liu, Yuandan
  • Tang, Tingfeng
  • Li, Haiyang
  • Luo, Limin

Abstract

Compared with state-owned enterprises, private enterprises generally face strict financing constraints, especially in the process of internationalization which have a greater demand for funds. At the meantime, we focus on how government subsidies, as a form of financial support, affect the outward foreign direct investment (OFDI) of private enterprises. Using micro-data from the CSMAR database covering private listed companies from 2013 to 2017, this empirical study reveals that government subsidies positively promote OFDI of private enterprises. Moreover, financing constraints have an adverse effect on OFDI, but government subsidies help mitigate this effect. Furthermore, the results indicate that the impact of government subsidies on private enterprises' OFDI varies depending on the degree of marketization.

Suggested Citation

  • Liu, Yuandan & Tang, Tingfeng & Li, Haiyang & Luo, Limin, 2024. "How do government subsidies affect OFDI of private enterprises? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 90(C), pages 241-251.
    • Handle: RePEc:eee:reveco:v:90:y:2024:i:c:p:241-251
    DOI: 10.1016/j.iref.2023.12.005
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    References listed on IDEAS

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