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How COVID-induced Uncertainty Influences Chinese Firms’ OFDI Binary Margins

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  • Chang Zhao
  • Ziwei Liu
  • Yibing Ding

Abstract

China’s economic policy uncertainty (EPU) and firms’ outward foreign direct investment (OFDI) research operates at the unitary level and lacks the structural foundations of binary margins. Thus, given the COVID-19 pandemic, this study employs the gravity model to examine the impact of China’s EPU on firms’ OFDI binary margins, using data from the first quarter of 2012 to the third quarter of 2020. Accordingly, China’s EPU inhibits extensive and intensive margins of firms’ OFDI significantly. Moreover, COVID-induced EPU has no significant impact on the OFDI intensive margin but positively impacts the extensive margin, indicating the motivation for diversifying investment risks.

Suggested Citation

  • Chang Zhao & Ziwei Liu & Yibing Ding, 2020. "How COVID-induced Uncertainty Influences Chinese Firms’ OFDI Binary Margins," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(15), pages 3613-3625, December.
    • Handle: RePEc:mes:emfitr:v:56:y:2020:i:15:p:3613-3625
    DOI: 10.1080/1540496X.2020.1855139
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    Cited by:

    1. Sui, Bo & Chang, Chun-Ping & Jang, Chyi-Lu & Gong, Qiang, 2021. "Analyzing causality between epidemics and oil prices: Role of the stock market," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 148-158.
    2. Chen, Yin-E & Li, Chunyan & Chang, Chun-Ping & Zheng, Mingbo, 2021. "Identifying the influence of natural disasters on technological innovation," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 22-36.
    3. Liu, Yun & Zhang, Yun & Zhang, Yifei & Xiao, He, 2022. "Small business owners’ Fintech credit in crises: Theory and evidence from farmers under the COVID-19," Pacific-Basin Finance Journal, Elsevier, vol. 71(C).
    4. Guan, Jialin & Xu, Huijuan & Huo, Da & Hua, Yechun & Wang, Yunfeng, 2021. "Economic policy uncertainty and corporate innovation: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    5. Yanfeng Liu & Miao Su & Jinjing Zhao & Sally Martin & Kum Fai Yuen & Choong-Bae Lee, 2023. "The determinants of China’s outward foreign direct investment: a vector error correction model analysis of coastal and landlocked countries," Economic Change and Restructuring, Springer, vol. 56(1), pages 29-56, February.
    6. Rui Wang & Sheng Ma & Xinxin Xu & Pan Song, 2021. "Heterogeneous Shareholders’ Participation, COVID-19 Impact, and Innovation Decisions of State-Owned Firms: Evidence from China," Sustainability, MDPI, vol. 13(8), pages 1-22, April.

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