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Does institutional distance affect the risk preference of enterprises' OFDI: Evidence from China

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  • Cheng Peng
  • Hui Jiang
  • Hongti Song
  • Tianyi Zhang

Abstract

The paper made an empirical analysis on how institutional distance affects the risk preference of enterprises' OFDI by using the sample of A‐share listed companies in China from 2014 to 2018 and further explored how institutional distance affected enterprises' preference for low‐risk investment in OFDI in “the belt and road” and other countries through fuzzy set qualitative comparative analysis. The paper shows that the institutional distance is negatively correlated with the risk preference of enterprises' OFDI. Six factors, such as voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption, form diversified configuration forms and influence paths that affect the risk preference of Chinese enterprises' OFDI. The specific performance is that “high voice and accountability, low government efficiency and low corruption control” will drive enterprises' low‐risk investment preference in “the belt and road” countries; And “low government efficiency, low regulatory quality and high legal level” will drive enterprises' low‐risk investment preference in other countries.

Suggested Citation

  • Cheng Peng & Hui Jiang & Hongti Song & Tianyi Zhang, 2022. "Does institutional distance affect the risk preference of enterprises' OFDI: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1209-1223, July.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:5:p:1209-1223
    DOI: 10.1002/mde.3448
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    References listed on IDEAS

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    1. Li, Jiatao & Yao, Fiona Kun, 2010. "The role of reference groups in international investment decisions by firms from emerging economies," Journal of International Management, Elsevier, vol. 16(2), pages 143-153, June.
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