Government intervention and firm investment : evidence from international micro-data

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

7 Citations (Scopus)

Abstract

Building on the important study by Beck et al. (2005), we examine how government intervention in firms' decision-making is related to their investment and sales growth. Using the unique World Bank dataset (WBES) covering 6500 firms in 70 countries, we find strong evidence that the extent of government intervention in firms' investment, employment, sales, pricing, dividend, and merger and acquisition decisions is negatively related to their investment and sales growth, with the effect being more profound in foreign owned firms and less significant in state-owned firms. The empirical results are robust to a series of robustness tests and instrumental variable regressions.
Original languageEnglish
Pages (from-to)637-653
Number of pages17
JournalJournal of International Money and Finance
Volume32
Early online date22 Jun 2012
DOIs
Publication statusPublished - Feb 2013

Fingerprint

Micro data
Firm investment
Government intervention
Sales growth
World Bank
Pricing
Robustness test
Decision making
Mergers and acquisitions
Dividends
Empirical results
Instrumental variables regression

Bibliographical note

The authors gratefully acknowledge financial support from the HKSAR Government (GRF 147810) and Chinese University of Hong Kong.

Keywords

  • Firm investment
  • Government intervention
  • International evidence

Cite this

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Government intervention and firm investment : evidence from international micro-data. / LIN, Chen; WONG, Sonia Man-lai.

In: Journal of International Money and Finance, Vol. 32, 02.2013, p. 637-653.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

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AB - Building on the important study by Beck et al. (2005), we examine how government intervention in firms' decision-making is related to their investment and sales growth. Using the unique World Bank dataset (WBES) covering 6500 firms in 70 countries, we find strong evidence that the extent of government intervention in firms' investment, employment, sales, pricing, dividend, and merger and acquisition decisions is negatively related to their investment and sales growth, with the effect being more profound in foreign owned firms and less significant in state-owned firms. The empirical results are robust to a series of robustness tests and instrumental variable regressions.

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