Trade-induced competition and ownership dynamics

Qing HU; Wenjing LI; Chen LIN; Lai WEI

doi:10.1016/j.jdeveco.2022.102979

Trade-induced competition and ownership dynamics

Qing HU, Wenjing LI^*, Chen LIN, Lai WEI

^*Corresponding author for this work

FACULTY OF BUSINESS

Research output: Journal Publications › Journal Article (refereed) › peer-review

Abstract

This paper documents a causal effect of trade-induced competition on firms’ ownership dynamics using the largest trade liberalization China has experienced, its accession to the World Trade Organization. By exploiting varying degrees of tariff reductions across industries, we find that firms that are more affected by competitive shocks experience a larger relative increase in their foreign ownership compared with those less affected. In addition, we find a stronger (weaker) effect for firms with a greater (lesser) demand for external financing and technology, which indicates the strategic role of foreign shareholders in empowering domestic firms to obtain financing and new technologies in a competitive market.

Original language	English
Article number	102979
Journal	Journal of Development Economics
Volume	160
Early online date	27 Sept 2022
DOIs	https://doi.org/10.1016/j.jdeveco.2022.102979
Publication status	Published - Jan 2023

Bibliographical note

Funding Information:
We thank the editor, two anonymous referees, discussants and participants at the 15th Chinese Finance Annual Meeting and the 2018 Hong Kong–Shenzhen Greater Bay Area Finance Conference for their helpful comments and suggestions. Hu acknowledges the financial support from the Fundamental Research Funds for the Central Universities, and the Research Funds of Renmin University of China (No. 21XNF002 ). Li acknowledges the financial support from the National Natural Science Foundation of China (No. 71772078 ; 72132002 ). Lin acknowledges the financial support from the National Natural Science Foundation of China (No. 72192841 ). Wei acknowledges the financial support from the Early Career Scheme of the Hong Kong Research Grant Council (No. 23500417 ).

Publisher Copyright:
© 2022 Elsevier B.V.

Keywords

Trade liberalization
Competition
Ownership dynamics

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10.1016/j.jdeveco.2022.102979

https://linkinghub.elsevier.com/retrieve/pii/S0304387822001213

Cite this

@article{9626c79f2990419587548f05ccdfc861,

title = "Trade-induced competition and ownership dynamics",

abstract = "This paper documents a causal effect of trade-induced competition on firms{\textquoteright} ownership dynamics using the largest trade liberalization China has experienced, its accession to the World Trade Organization. By exploiting varying degrees of tariff reductions across industries, we find that firms that are more affected by competitive shocks experience a larger relative increase in their foreign ownership compared with those less affected. In addition, we find a stronger (weaker) effect for firms with a greater (lesser) demand for external financing and technology, which indicates the strategic role of foreign shareholders in empowering domestic firms to obtain financing and new technologies in a competitive market.",

keywords = "Trade liberalization, Competition, Ownership dynamics",

author = "Qing HU and Wenjing LI and Chen LIN and Lai WEI",

note = "Funding Information: We thank the editor, two anonymous referees, discussants and participants at the 15th Chinese Finance Annual Meeting and the 2018 Hong Kong–Shenzhen Greater Bay Area Finance Conference for their helpful comments and suggestions. Hu acknowledges the financial support from the Fundamental Research Funds for the Central Universities, and the Research Funds of Renmin University of China (No. 21XNF002 ). Li acknowledges the financial support from the National Natural Science Foundation of China (No. 71772078 ; 72132002 ). Lin acknowledges the financial support from the National Natural Science Foundation of China (No. 72192841 ). Wei acknowledges the financial support from the Early Career Scheme of the Hong Kong Research Grant Council (No. 23500417 ). Publisher Copyright: {\textcopyright} 2022 Elsevier B.V.",

year = "2023",

month = jan,

doi = "10.1016/j.jdeveco.2022.102979",

language = "English",

volume = "160",

journal = "Journal of Development of Economics",

issn = "0304-3878",

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TY - JOUR

T1 - Trade-induced competition and ownership dynamics

AU - HU, Qing

AU - LI, Wenjing

AU - LIN, Chen

AU - WEI, Lai

N1 - Funding Information: We thank the editor, two anonymous referees, discussants and participants at the 15th Chinese Finance Annual Meeting and the 2018 Hong Kong–Shenzhen Greater Bay Area Finance Conference for their helpful comments and suggestions. Hu acknowledges the financial support from the Fundamental Research Funds for the Central Universities, and the Research Funds of Renmin University of China (No. 21XNF002 ). Li acknowledges the financial support from the National Natural Science Foundation of China (No. 71772078 ; 72132002 ). Lin acknowledges the financial support from the National Natural Science Foundation of China (No. 72192841 ). Wei acknowledges the financial support from the Early Career Scheme of the Hong Kong Research Grant Council (No. 23500417 ). Publisher Copyright: © 2022 Elsevier B.V.

PY - 2023/1

Y1 - 2023/1

N2 - This paper documents a causal effect of trade-induced competition on firms’ ownership dynamics using the largest trade liberalization China has experienced, its accession to the World Trade Organization. By exploiting varying degrees of tariff reductions across industries, we find that firms that are more affected by competitive shocks experience a larger relative increase in their foreign ownership compared with those less affected. In addition, we find a stronger (weaker) effect for firms with a greater (lesser) demand for external financing and technology, which indicates the strategic role of foreign shareholders in empowering domestic firms to obtain financing and new technologies in a competitive market.

AB - This paper documents a causal effect of trade-induced competition on firms’ ownership dynamics using the largest trade liberalization China has experienced, its accession to the World Trade Organization. By exploiting varying degrees of tariff reductions across industries, we find that firms that are more affected by competitive shocks experience a larger relative increase in their foreign ownership compared with those less affected. In addition, we find a stronger (weaker) effect for firms with a greater (lesser) demand for external financing and technology, which indicates the strategic role of foreign shareholders in empowering domestic firms to obtain financing and new technologies in a competitive market.

KW - Trade liberalization

KW - Competition

KW - Ownership dynamics

UR - http://www.scopus.com/inward/record.url?scp=85140755428&partnerID=8YFLogxK

U2 - 10.1016/j.jdeveco.2022.102979

DO - 10.1016/j.jdeveco.2022.102979

M3 - Journal Article (refereed)

SN - 0304-3878

VL - 160

JO - Journal of Development of Economics

JF - Journal of Development of Economics

M1 - 102979

ER -

Trade-induced competition and ownership dynamics

Abstract

Bibliographical note

Keywords

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Trade-induced Competition and Corporate Transformation (貿易競爭和企業轉型)

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Trade-induced competition and ownership dynamics

Abstract

Bibliographical note

Keywords

Access to Document

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Trade-induced Competition and Corporate Transformation (貿易競爭和企業轉型)

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